Quality Choice under Competition: Game-theoretical Approach

In the paper a game-theoretical model of quality choice under competition is suggested. The game-theoretical model is presented as a two-stage game where production companies compete on an industrial market and consumer's taste to quality in non-uniformly distributed. The strong Nash equilibrium in the investigated game was obtained in explicit form which allowed us to evaluate prices, companies market shares and revenues in the equilibrium. A case study for Internet-trading systems was used to approve the suggested quality choice mechanism.