Cheaper Shipping Could Spark Price Wars Between Rival Firms
The article explores how changes in transport costs impact duopoly markets where two companies compete. The researchers found a new way to show that there is only one equilibrium point where the two companies reach a balance in these markets. They looked at different scenarios, one where if one company makes more products, the other's profits decrease, and the other where if one company makes more products, the other's profits increase. In both cases, the companies were assumed to produce more efficiently as they made more products.