Many product recalls are caused by quality-related product failures. When such recalls occur, the effects may not only be limited to the firm selling the product but also extend to competing firms in the category. This paper analyzes quality and pricing strategies for competing firms facing the risk of a severe quality-related recall making the product hazardous and leading to its removal from the market. We develop a two-stage Nash game where the probability of recall depends on the firms’ chosen quality investments, and either firm can experience a recall. We consider a utility-based model where consumers’ sensitivity to price and quality can change following the recall. Our results indicate that the competitor should lower its price after a recall if consumers’ price sensitivity changes enough and may increase or keep its price the same otherwise. Surprisingly, considering the risk of a recall does not always lead firms to enhance their product quality. If the change in consumer quality sensitivity is low enough, firms adopt an inferior product quality level than when they overlook the product recall risk, even if consumer quality sensitivity increases and/or consumer price sensitivity decreases after the recall. These results can help companies plan their pricing and quality decisions in competitive industries with potential product quality failures leading to recalls.

许多产品召回是由与质量相关的产品故障引起的。当此类召回发生时，影响可能不仅限于销售该产品的公司，而且还会扩展到该类别的竞争公司。本文分析了竞争公司的质量和定价策略，这些公司面临严重的质量相关召回风险，使产品变得危险并导致其从市场上撤出。我们开发了一个两阶段纳什博弈，其中召回的概率取决于公司选择的优质投资，并且任何一家公司都可能经历召回。我们考虑基于效用的模型，在该模型中，消费者对价格和质量的敏感度可能会在召回后发生变化。我们的结果表明，如果消费者的价格敏感性变化足够大，竞争对手应该在召回后降低价格，否则可能会提高或保持价格不变。令人惊讶的是，考虑召回风险并不总能让公司提高产品质量。如果消费者质量敏感度的变化足够低，即使召回后消费者质量敏感度增加和/或消费者价格敏感度降低，企业也会采用比忽视产品召回风险时更低的产品质量水平。这些结果可以帮助公司在竞争激烈的行业中规划定价和质量决策，这些行业可能存在产品质量问题导致召回。如果消费者质量敏感度的变化足够低，即使召回后消费者质量敏感度增加和/或消费者价格敏感度降低，企业也会采用比忽视产品召回风险时更低的产品质量水平。这些结果可以帮助公司在竞争激烈的行业中规划定价和质量决策，这些行业可能存在产品质量问题导致召回。如果消费者质量敏感度的变化足够低，即使召回后消费者质量敏感度增加和/或消费者价格敏感度降低，企业也会采用比忽视产品召回风险时更低的产品质量水平。这些结果可以帮助公司在竞争激烈的行业中规划定价和质量决策，这些行业可能存在产品质量问题导致召回。