Contrasting total money transfers amongst the option plus the brands phase is far more simple given that e fashion

Contrasting total money transfers amongst the option plus the brands phase is far more simple given that e fashion

To present causes general notation for easy resource, we obtain, (3) S l a-b e l ? S a l t age r ? 1 step 3 ( 2 t c t + t f t ) step 1 ? 1 step three dos t c t + t f t t c t + t f t ? F (3)

Area of the difference in the entire money transfers in phases ‘s the antique company’s go on to a-c t = 1 , implying market express of just one to own Base products in the new labeling stage. On the labels stage, both organizations also have Ft factors at the Feet item’s price of the contrary stage 1 3 ( dos t c t + t f t ) , the original an element of the picture. The difference inside the riches transfers ergo quantity so you can an evaluation out-of market shares away from Base circumstances between them stages, which is 1 ? step one step 3 2 t c t + t f t t c t + t f t > 0, the second part in (3). not, it confident effectation of enhanced business to your riches transmits will be getting as compared to even more repaired prices F upcoming together whenever a few agencies provide Base issues. This inefficiency on the market can not be avoided unless both organizations would be that. Such as for instance a dominance reputation perform but not bring about most other inefficiencies. Note that (3) gets t / dos ? F ? 0 getting symmetrical psychological length can cost you, implying whenever firms’ winnings is actually confident, riches transfers boost whenever swinging in the alternative phase with the brands phase.

Jaffee and you may Howard 2010 )

Additionally, i compare the distinctions during the riches transfers each business, contributing to the fresh new dialogue of one’s dilution from Foot (e.g. Carry out Ft agencies actually bring faster wide range transfers in the event the competition gets more critical from the Foot business? Researching S f t a l t e roentgen and you will S f t l a b e l , we derive: (4) S f t a great l t age r ? S f t l a b elizabeth l ? t c t ? t f t (4)

This really is also noticeable in 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 in comparison to wealth transfers in the labeling shagle hesap silme 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.