Optimal Number of Brands for Heterogeneous Goods under Price Competition

• Main Author: 廖美珍
• Other Authors: 林啟智
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/41751971723124767544

碩士 === 佛光大學 === 經濟學系 === 100 === With demand for environment-friendly, healthy, and natural foods now a global trend, organic foods have become a booming industry. Currently, Europe has the best developed organic foods industry. Since 1986, Taiwan has undergone a developmental process of preparation, testing, demonstration, and promotion, with the result that there are now a large number of vendors producing and selling products to meet the homogenous market demand. For this reason, the market has now moved from its former monopoly market state to its current monopolistic competitive market state. To meet the general public’s rising qualities of life and heightening expectations for environment-friendly, healthy, and natural foods, suppliers have responded with a large variety of heterogeneous organic products. This happens to be a key characteristic of a monopolistic competition market. Using the organic foods industry as a starting point, this paper compares the pricing, output, store branch or brand numbers, and social welfare differences between monopoly markets (with multiple store branches or brands), monopolistic competitive markets (with multiple store branches or brands) that produce a single product, and perfectly competitive markets. The first stage of this paper uses the game theory to identify the optimal number of store branches (brand numbers), and the second stage to study price competition. To backward method for solving first obtained the second stage of price competition, and then investigate the optimal number of branches in the different market structures (brand numbers). Store branch numbers have a substitution indicator critical point that falls between 0 and 1. Although this critical point is not an exact value, we can make certain assumptions to determine store branch numbers under different market conditions. Results show that when a product has small levels of substitution, the numbers of store branches are greatest for perfectly competitive markets, and smallest for monopoly markets. Conversely, when a product’s substitution levels are high, the ranking of store branch numbers are (from great to small), monopoly markets, monopolistic competition markets, and perfectly competitive markets. If we step away from economic theories regarding product substitution and market types, and view these products as agricultural goods or necessities, there is empirical evidence that the results above apply under actual market conditions. Coincidentally, the results of this study mirror the efforts of a particular organic foods chain in Taiwan, which in its initial stage of operations played an approximate government role in that they paid subsidies or provided inputs or technologies to encourage farmers’ willingness to farm. Also, they used unique marketing channels to aid organic foods farmers in lowering disproportional profit gains. This was not only more efficient, but also boosted farmer confidence in the production of organic vegetables; thus were numerous obstacles overcome, and the doors to the Taiwanese organic foods market opened to provide a better way of life for the general public.