Product flexibility leads to price wars in competitive markets.
The article explores how companies compete in a market where they sell similar products and can set both prices and locations. They find that when companies make offers at the same time, there is no clear winner for customers who value the products highly. However, if one company acts first, the other company can do better by following their lead. The company that acts first sets a lower price, while the follower benefits. The effect of choosing a location is not as strong as the effect of setting prices. The researchers also found specific solutions for cases where costs increase linearly or quadratically. The results show how competition changes depending on how flexible companies are with their products and prices.