Product Quality Decisions and Government Incentive Approach for New Entrant Under Different Production Strategies

LI Tuochen, WANG Changzhu, WANG Xiaoxi, NA Qi

Journal of Systems Science and Mathematical Sciences ›› 2023, Vol. 43 ›› Issue (7) : 1804-1818.

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Journal of Systems Science and Mathematical Sciences ›› 2023, Vol. 43 ›› Issue (7) : 1804-1818. DOI: 10.12341/jssms22444

Product Quality Decisions and Government Incentive Approach for New Entrant Under Different Production Strategies

  • LI Tuochen1, WANG Changzhu1, WANG Xiaoxi1, NA Qi1,2
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Abstract

Considering both quality and price preferences of consumers, this paper respectively builds quality and price competition models for new entrant and incumbent under quality input incentives and high quality product sales incentive, based on three production strategies for new entrant in a competitive context. Through model derivation and numerical simulation using game theory and mathematical economics analysis methods, we analyze the relevant decisions and optimal government incentives in the product quality transformation process of new entrant from the perspectives of both consumer quality preferences and technical difficulty. The results are that:The level of quality inputs of new entrant and incumbent is constrained by consumer quality preferences, and different consumer quality preferences will change the optimal government incentives; stronger willingness of new entrant to transition from offering only low quality products to offering both low/high quality products when the technical difficulty is low; if the new entrant offers only high quality products when the technical difficulty is high, then choosing a high quality product sales incentive can further reduce the profit gap between the two firms, which in turn provides an opportunity for the government to exit the product market.

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New entrant / quality transformation / incentive approach / production strategy / market competition

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LI Tuochen , WANG Changzhu , WANG Xiaoxi , NA Qi. Product Quality Decisions and Government Incentive Approach for New Entrant Under Different Production Strategies. Journal of System Science and Mathematical Science Chinese Series, 2023, 43(7): 1804-1818 https://doi.org/10.12341/jssms22444

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