제조비용 증가에 대한 대응 전략으로서 제품 크기 축소와 가격 인상의 비교 연구

We analyze a duopoly competition when two firms face input cost increases. The objective of this study is to determinethe firms’ optimal strategy between a price increase and downsizing under conditions of a spatially differentiated marketand consumers’ diminishing utility on the product size. We develop a theoretical model of two competing firms offeringhomogenous products using the standard Hotelling model to determine how firms’ optimal strategies change when facinginput cost increases. In this paper, there are two types of duopoly competitions: symmetric and asymmetric. In thesymmetric case, the two firms have the same marginal cost and are producing and selling identical products. In theasymmetric case, the two firms have different marginal costs. The results show that the optimal strategy decisiondepends on the size of the input cost increase and the cost differences between the two firms. We find that whentwo firms are asymmetric (i.e., they have different marginal costs), the two firms might choose asymmetric pairsof strategies in equilibrium under certain conditions. When the cost differences between the two firms are sufficientlylarge and the cost increase is sufficiently small, the cost leader chooses price increase, and the cost-disadvantagedfirm chooses downsizing in equilibrium. This asymmetric strategy reduces price competition between two firms, andconsumers are better off. When the cost differences between the two firms are sufficiently large, downsizing is thedominant strategy for the cost-disadvantaged firm. The cost-disadvantaged firm finds it more profitable to reducethe product size than to increase its price to reduce price competition, because consumers prefer downsizing to priceincreases. This paper might be a good starting point for further analytical research in this area.