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Rival Strategic Options In A Market Sharing Duopoly
We build on previous solutions for mutually exclusive options in a duopoly with switching and divestment alternatives. We study the likely implications for increasing the leader’s market share MS at successive levels of market revenue. The conventional net present value NPV thresholds for switching and divestments, ignoring rival and strategic options, are likely to be a misleading basis for making MS decisions. The consequences of MS changes on the values of both the leader and follower are often surprising. The NPV of operations for the leader is reduced by increased MS when revenue is low, with a further negative change of value in the net switch and divest option values. The NPV of operations is increased for the leader by increased MS when revenue is higher, reduced by the decrease in value of the leader’s rival option value. Those strategy results are consistent with the sign and dimension of MS partial derivatives, with some novel analytical solutions.