Quality and competition

Rajiv D. Banker, Inder Khosla, Kingshuk K. Sinha

Research output: Contribution to journalArticlepeer-review

306 Scopus citations

Abstract

In recent years, the practitioner literature in operations management has seen a dramatic surge in articles on quality management. It reflects the increased emphasis on quality by U.S. firms, which has been attributed largely to increased competition faced by them. The question of how quality is influenced by competitive intensity, however, has not received much attention, either in the practitioner or the academic research literatures. The notion of competitive intensity itself has not been defined precisely. In this paper, we develop formal models of oligopolistic competition to investigate whether equilibrium levels of quality increase as competition intensifies. We consider three different competitive settings: (i) asymmetric duopolistic competition where the dominant firm's intrinsic demand potential decreases; (ii) a symmetric duopoly where the firms are precluded from cooperating in setting quality levels; and (iii) symmetric oligopolistic competition where the number of firms increases. We find that the relation between equilibrium quality and competitive intensity depends on what is understood by increased competition and, in addition, the relation is contingent on the values of parameters describing the cost and demand structure for the industry.

Original languageEnglish (US)
Pages (from-to)1179-1192
Number of pages14
JournalManagement Science
Volume44
Issue number9
DOIs
StatePublished - Sep 1998

Keywords

  • Competition
  • Cooperation
  • Investment
  • Oligopoly
  • Quality

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