Hawks and doves in segmented markets:a formal approach to competitive aggressiveness

Competitive aggressiveness is analyzed in a simple spatial oligopolisticcompetition model, where each one of two firms supplies two connectedmarket segments, one captive the other contested. To begin with, firmsare simply assumed to maximize profit subject to two constraints, one relatedto competitiveness, the other to market feasibility. The competitiveaggressiveness of each firm, measured by the relative implicit price of theformer constraint, is then endogenous and may be taken as a parameter tocharacterize the set of equilibria. A further step consists in supposing thatcompetitive aggressiveness is controlled by each firm through its managerhiring decision, in a preliminary stage of a delegation game. When competition is exogenously intensified, through higher product substitutabilityor through larger relative size of the contested market segment, competitiveaggressiveness is decreased at the subgame perfect equilibrium. Thisdecrease partially compensates for the negative effect on profitability ofmore intense competition....