发布者:shenaping 发布时间：2017-07-05 11:30:56 浏览数： 次 [ 返回 ]
演讲题目：Why Does the Firm Provide Key Input to the Rival?
演讲嘉宾：Michelle Y. Lu, McGill University
In this research, we try to understand a prevalent business puzzle that one of the retail market competitors supplies the best of the key input to its close rival, making the rival firm an even stronger player. For example, Samsung supplies its leading 14-nanometer FinFET to Apple for A9 chip despite the fact that the two companies compete fiercely in the smart phone market. We provide a competitive analysis of this dual channel issue where the vertically integrated producer (VIP) firm supplies and competes with its downstream rival. We propose a new agency theory to explain the underlying mechanism why the VIP firm is better off providing high-quality input to the rival. By providing the best input to the rival and then extracting its surplus from the upstream, the VIP firm can use the rival as its downstream selling agent. Counter-intuitively, our agency theory suggests that the VIP firm’s problem does not necessarily lie in vertical conflict – trade-off between upstream and downstream profits; but rather lies in downstream conflict – a comparison of the two firms’ total downstream profits under different input provision strategies. The key characteristics of our model focus on an expanding market and the difference in firms’ com- petency in consumer value creation. By allowing a competent competitor to use better input, the VIP firm can benefit from a competitor’s ability of fetching higher consumer valuation, which enables it to either profit from larger consumer surplus extraction or from total de- mand expansion depending on the size of the value creation. The downstream conflict arises when high quality input provision results in less differentiation. The VIP firm forecloses its high quality input to the rival if consumer value creation does not sufficiently counteract the negative competitive effect intensified by less differentiation. We are also able to provide managerial implications to practitioners by constructing an example that consumer value creation takes on a multiplicative term of a firm’s brand name and the input quality.
Michelle Y. Lu is an Assistant Professor of Marketing at McGill University. She graduated with Ph.D. Degree in Marketing from Yale University and BA Degree in Economics from Peking University. Her research interests focus on advertising, marketing communication, and channel conflicts.