Competition and contracting in service industries |
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| Authors: | Dominic DiPalantino Ramesh Johari Gabriel Y Weintraub |
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| Institution: | aGoogle Inc., United States;bManagement Science and Engineering, Stanford University, United States;cColumbia Business School, United States |
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| Abstract: | In service industries with congestion effects, two very different contractual structures are commonly observed, depending on whether or not firms choose to offer a guaranteed service level. We analyze the impact of these choices on market outcomes in oligopolistic industries. Our results highlight how different contractual agreements change the intensity of price competition in service industries. Broadly speaking, we show that competition is intensified when firms choose to offer service level guarantees. |
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| Keywords: | Competition Contracts Game theory Services Congestion |
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