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Respond to the question: 2 firms n0 profit margin Who wins?

02/15/2003 12:32 AM by Hedley Rainnie; 2 firms. n-%>0% profit margin. Who wins?
Imagine 2 Chinese high tech firms making a near identical widget. Assume that via the cost structures, they can hire a large # of employees at low cost, also as they compete, they lower the profit margins and are happy to do so at extreme low profit margins. Also assume that IP is liquid between the firms, there are no secrets.

What happens in the limit? A US/European firm will fold the business once the profit margin drops, not so in Asia.

I assume that this can be played out with N firms.

A Chinese co-worker said that the company that has better govt ties will win ultimately as that would be the only unleavening of the playing field.

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