The Pricing Strategy of Oligopolistic Competition Food Firms with the Asymmetric Information and Scientific Uncertainty
The arguments for and against genetically modified (GM) food focus on the characteristics of the scientific uncertainty and asymmetric information for the GM food. How do these two factors affect the competition and pricing strategy of food firms that separate GM food and conventional food conformin...
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| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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Wiley
2017-01-01
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| Series: | Journal of Food Quality |
| Online Access: | http://dx.doi.org/10.1155/2017/4628905 |
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| author | Li Zhao Changwei Wang Xiaohui Peng Bin Liu David Ahlstrom |
| author_facet | Li Zhao Changwei Wang Xiaohui Peng Bin Liu David Ahlstrom |
| author_sort | Li Zhao |
| collection | DOAJ |
| description | The arguments for and against genetically modified (GM) food focus on the characteristics of the scientific uncertainty and asymmetric information for the GM food. How do these two factors affect the competition and pricing strategy of food firms that separate GM food and conventional food conforming to consumer’s right to know? We explore the issue of pricing strategies between two firms producing horizontally and vertically differentiated foods in the context of asymmetric information and scientific uncertainty. The theoretical results show that there are two separating perfect Bayesian equilibria in which the prices of the conventional food and GM food are strategic complements and the profits of two types of firms are both increasing in the price of GM food. The numerical example shows that a decrease of the expected potential net damage as the most sensitive parameter leads to an increase of the profits of the two firms. Additionally, an increase in product differentiation helps to increase the two firms’ profits. Finally, the decrease in risk aversion as the second sensitive parameter helps to increase both products’ prices and quantities and both firms’ profits. This paper contributes by combining food safety regulation with market mechanisms and competition. |
| format | Article |
| id | doaj-art-fba709981ec749b487ef154cce00a943 |
| institution | Kabale University |
| issn | 0146-9428 1745-4557 |
| language | English |
| publishDate | 2017-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Food Quality |
| spelling | doaj-art-fba709981ec749b487ef154cce00a9432025-02-03T05:51:42ZengWileyJournal of Food Quality0146-94281745-45572017-01-01201710.1155/2017/46289054628905The Pricing Strategy of Oligopolistic Competition Food Firms with the Asymmetric Information and Scientific UncertaintyLi Zhao0Changwei Wang1Xiaohui Peng2Bin Liu3David Ahlstrom4School of Economics and Management, Shanghai Maritime University, Pudong New District, Shanghai 201306, ChinaInstitute of Finance and Economics, Shanghai University of Finance and Economics, Yangpu District, Shanghai, ChinaBusiness School, Nanjing Normal University, Nanjing 210023, ChinaSchool of Economics and Management, Shanghai Maritime University, Pudong New District, Shanghai 201306, ChinaDepartment of Management, CUHK Business School, The Chinese University of Hong Kong, Shatin, New Territories, Hong KongThe arguments for and against genetically modified (GM) food focus on the characteristics of the scientific uncertainty and asymmetric information for the GM food. How do these two factors affect the competition and pricing strategy of food firms that separate GM food and conventional food conforming to consumer’s right to know? We explore the issue of pricing strategies between two firms producing horizontally and vertically differentiated foods in the context of asymmetric information and scientific uncertainty. The theoretical results show that there are two separating perfect Bayesian equilibria in which the prices of the conventional food and GM food are strategic complements and the profits of two types of firms are both increasing in the price of GM food. The numerical example shows that a decrease of the expected potential net damage as the most sensitive parameter leads to an increase of the profits of the two firms. Additionally, an increase in product differentiation helps to increase the two firms’ profits. Finally, the decrease in risk aversion as the second sensitive parameter helps to increase both products’ prices and quantities and both firms’ profits. This paper contributes by combining food safety regulation with market mechanisms and competition.http://dx.doi.org/10.1155/2017/4628905 |
| spellingShingle | Li Zhao Changwei Wang Xiaohui Peng Bin Liu David Ahlstrom The Pricing Strategy of Oligopolistic Competition Food Firms with the Asymmetric Information and Scientific Uncertainty Journal of Food Quality |
| title | The Pricing Strategy of Oligopolistic Competition Food Firms with the Asymmetric Information and Scientific Uncertainty |
| title_full | The Pricing Strategy of Oligopolistic Competition Food Firms with the Asymmetric Information and Scientific Uncertainty |
| title_fullStr | The Pricing Strategy of Oligopolistic Competition Food Firms with the Asymmetric Information and Scientific Uncertainty |
| title_full_unstemmed | The Pricing Strategy of Oligopolistic Competition Food Firms with the Asymmetric Information and Scientific Uncertainty |
| title_short | The Pricing Strategy of Oligopolistic Competition Food Firms with the Asymmetric Information and Scientific Uncertainty |
| title_sort | pricing strategy of oligopolistic competition food firms with the asymmetric information and scientific uncertainty |
| url | http://dx.doi.org/10.1155/2017/4628905 |
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