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《Journal of Finance and Economics》 2009-06
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Analysis of Strategic Behaviors of Firms in Markets with Transfer Costs

JIANG Chuan-hai1,XIA Da-wei2(1. School of International Business Management, Shanghai Universityof Finance and Economics, Shanghai 200433, China;2. ShanghaiNational Accounting Institute, Shanghai 201702, China)  
Consumers will incur transfer costs when they change their consumption habits from one brand to another. The paper analyzes the effects of transfer cost on firms’ strategic behaviors and social welfare by using dynamic game theory. In quantity-competition dynamic model, existing firms can blockade, prevent or accommodate the entry of potential competitors with the changing transfer costs, and the social welfare will rise if the entry of potential competitors occurs. In price competition model with product differentiation, existing firms can prevent or accommodate the entry of potential competitors, but they can’t blockade the entry of potential competitors. The social welfare will not decline, no matter which strategic behavior existing firms take. Governments should encourage new entries from the perspective of public policy. The results in this paper are very different from klemperer(1988),in which he derived that potential competitors’ entries would make social welfare worse off.
【Fund】: 教育部人文社会科学项目《信息产品的定价和策略性行为分析及政府规制》(06JA790071);; 上海市社科规划项目(01FJB002);; 上海市教委青年基金(01QN50);; 上海财经大学“211工程”的项目成果
【CateGory Index】: F272;F224
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1 JIANG Chuan-hai~1,XIA Da-wei~2(1.Shanghai University of Finance and Economics,Shanghai 200433,China;2.Shanghai National Accounting Institute,Shanghai 201702,China);Competitive Markets with Product Difference and Switching Costs[J];Journal of Finance and Economics;2006-04
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