A theory of product selection (a model of a NIC)
Lee, Il Houng (1989) A theory of product selection (a model of a NIC). PhD thesis, University of Warwick.
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Official URL: http://webcat.warwick.ac.uk/record=b1408752~S15
The objective of this work is to theoretically evaluate an important
aspect of a Newly Industrializing Country (NICs): Korea. Namely, the
behaviour of firms in Korea competing with firms in an industrialized
country after all Government intervention of the former is withdrawn.
This aspect is considered in the main part while a descriptive
introductory part introduces the Korean economy as a NIC.
We construct a simple asymmetric duopoly model where firms conjectures
play an important role in deriving the Perfect Equilibrium for a two
stage game. Different costs of production and first mover advantage
form the basis of the asymmetry. We find that under Cournot
conjectures assumption for the marketing stage and certain cost
conditions, it is profitable for the incumbent firm to stay a leader
and the follower to remain a follower. For some cost conditions and a
credible threat at the disposal of the follower, the incumbent firm
may be forced to stay a leader even though it is more profitable to
became a follower.
We examine possible licensing rules the leader may propose to the
follower. The dominant strategy, we find, is a licence fee that is a
function of the quality difference between the top quality of the
market leader and the level of quality it is selling to the follower.
There will be a cost to the leader in terms of a lower licence fee to
prevent possible leap forgging. Once we allow for free copying, we
find that the follower will copy closely the new product of the
leadership. Under Bertrand conjectures assumption, we find that
unless the firm with higher production cost remains the leader
offering a higher quality product, it will be driven out of the
market, i. e., either it has to innovate or-die.
|Item Type:||Thesis or Dissertation (PhD)|
|Subjects:||H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
|Library of Congress Subject Headings (LCSH):||Korea -- Economic conditions, Industrialization -- Korea, Game theory, New products, Competition|
|Official Date:||November 1989|
|Institution:||University of Warwick|
|Theses Department:||Department of Economics|
|Supervisor(s)/Advisor:||Miller, Marcus, 1941- ; Ireland, Norman J.|
|Sponsors:||University of Warwick. Dept. of Economics|
|Extent:||, 260,  p.|
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