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Session 6.docx

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York University
Administrative Studies
ADMS 4900
You- Ta Chuang

Session 6 When firms diversify into different markets, their diversification create multiple market contacts with other firms, which lead to multi-market competition. Multi-market competition: firms simultaneously compete against each other in more than one market. When firms diversify their competition becomes more complicated. Markets can be:  Products/Services  Geographical location When deciding what markets to go into, AMC model must be considered. Retaliation could be within the market, or firms might attack other markets you are already in. E.g. Firm 1 attacks market 8, Firm 3 attacks market 3. Multimarket Contact: two firms simultaneously meet with each other in more than one market. This leads to several consequences (Google vs. Apple)  Mutual understanding between two firms of each others resources and capabilities o Familiar with each other’s behavior  Increase awareness for AMC model  Market relationship o Creates an opportunity to attack/retaliate; leaves you vulnerable to being attacked  deterrence will decrease your motivation to attack  Both will cause mutual forbearance  competition between both firms will become less intense Therefore two firms competing in one market will be more intense than in three markets.  Single-market firms suffer due to increased competitive pressure form MMF  Customers/society suffer because MMF have little incentive to offer better quality/service, price Assumptions: 1. Perfect information  you know everything about the other MMC rivals 2. Firms are capable  assumes firms are capable to attack/retaliate Implications for competitive interaction and multimarket interaction Multimarket Firms  Maintain existing MMC  benefit is to reduce competition  Create more MMC  increase ben
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