To present results in standard notation to possess easy source, we have, (3) S l a-b e l ? S good l t e roentgen ? step 1 step three ( dos t c t + t f t ) step one ? step 1 step three 2 t c t + t f t t c t + t f t ? F (3)
A portion of the difference in the wealth transfers in levels ‘s the old-fashioned company’s proceed to a-c t = step 1 , implying a market display of just one to have Base products in the fresh tags phase. About brands stage, both organizations likewise have Ft points at the Foot item’s cost of the contrary phase step 1 step 3 ( dos t c t + t f t ) , the first part of the formula. The difference from inside the wide range transfers therefore amounts in order to an assessment away from markets shares out of Ft factors between them stages, that is 1 ? step 1 step three dos t c t + t f t t c t + t f t > 0, the second area from inside the (3). not, which self-confident aftereffect of increased business towards wealth transmits is be than the most fixed cost F coming along when several businesses render Foot things. That it inefficiency in the business cannot be stopped unless one another organizations create become you to. Eg a monopoly reputation would although not cause other inefficiencies. Observe that (3) becomes t / 2 ? F ? 0 to possess symmetrical mental distance costs, implying when firms’ winnings was positive, wide range transfers improve when moving on choice stage on labels phase.
Jaffee and you may Howard 2010 )
On the other hand, we compare the differences into the wide range transmits per corporation, adding to the dialogue of your own dilution off Foot (age.grams. Create Legs firms indeed bring reduced riches transmits if race gets more critical regarding Legs business? Comparing S f t a good l t age roentgen and S f t l a b age l , i derive: (4) S f t a great l t elizabeth roentgen ? S f t l a-b age l ? t c t ? t f t (4)
It is also apparent for the (3)
The intuition behind (4) is as follows. As soon as t c t > t f t the FT firm’s market share in the alternative phase is larger than FT’s market share of 1 / 2 in the labeling phase. The higher the consumers’ psychological fairness costs regarding the conventional product, the more attractive the FT product becomes for consumers. The higher market share results in larger profits for the FT firm, making S f t a l t e r larger swapfinder online in comparison to wealth transfers in the labeling phase. Likewise, when t c t < t f t , the FT firm's market share in the alternative phase is smaller than in the FT labeling phase, resulting in lower wealth transfers in the alternative phase. For the conventional firm these considerations do not matter: as it generated zero wealth transfers in the alternative phase, it obviously transfers more in the labeling phase.
Also, the effect on average wealth transfers, the wealth transfers per product sold, add to the discussion on dilution. The conventional firm’s wealth transfers per product sold increase, while for the FT firm we find s ? f t a l t e r ? s ? f t l a b e l ? t c t ? t f t , due to the interplay of fixed costs and FT market shares. As in the alternative phase, the FT firm’s market share is larger (smaller) when t c t > ( < ) t f t , F is spread over more (less) products and average wealth transfers increase (decrease) for the FT firm. As FT market shares were relatively small, it is likely that the labeling phase thus results in higher average wealth transfers for the FT firm. Furthermore, it indicates a more efficient provision of wealth transfers by the FT firm.