Open AccessA Note On The Strategic Use of Service
Author(s) -
Charles E. Hegji,
Evan Moore
Publication year - 1970
Publication title -
journal of business strategies
Language(s) - English
Resource type - Journals
eISSN - 2162-6901
pISSN - 0887-2058
DOI - 10.54155/jbs.22.2.135-141
Subject(s) - duopoly , monopoly , service (business) , microeconomics , business , strategic complements , welfare , economics , industrial organization , strategic choice , strategic interaction , marketing , cournot competition , market economy
We develop a model of optimal service provision and pricing in which the levelof service is not viewed as a capacity choice. We study the provision of servicesin both a non-strategic setting, characterized by a monopoly, and in a strategicsetting, a differentiated price duopoly. We find that in both settings increasedservices lead to increased prices. However, unlike other models, the strategicsetting results in greater services than the non-strategic case. Additionally, wediscuss the welfare effects for consumers and find that any gains in consumersurplus from increased service provision in the strategic setting are more thanoffset by the associated higher equilibrium prices.