Model of Product Quality Choice and Internet-Trading Case Study

Abstract

In the paper the product quality evaluation and quality choice mechanism in case of competition is suggested. It is based on the estimation of price Nash-equilibrium and optimal quality differentiation. According to the suggested mechanism two-stage game-theoretical model is analyzed when production companies compete on some industrial market and consumer’s taste to quality in non-uniformly distributed. The solution in equilibrium was obtained in explicit form which allowed us to evaluate prices, companies market shares and revenues in equilibrium. A case study for Internet-trading systems was used to approve the suggested quality choice mechanism