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Vertical Product Differentiation in Theory and Practice

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Author Info

  • James Eales

    (Purdue University, West Lafayette, Indiana, USA)

  • James K. Binkley

    (Purdue University, West Lafayette, Indiana, USA)

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    Abstract

    This study examines the role of advertising on consumers' quality perception as a method to vertically differentiate in the baking mix market. Two companies, General Mills and Chelsea Mills have competed head to head since 1930s, using drastically different strategies. General Mills has consistently promoted Bisquick and provided recipes for its use. Chelsea Mills has never advertised its product, Jiffy, preferring instead to minimize cost and provide service to retailers. Both strategies have been successful, resulting in an equilibrium resembling theoretical vertical differentiation models.

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    Bibliographic Info

    Article provided by De Gruyter in its journal Journal of Agricultural & Food Industrial Organization.

    Volume (Year): 1 (2003)
    Issue (Month): 1 ()
    Pages: 16

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    Handle: RePEc:bpj:bjafio:v:1:y:2003:i:1:n:16

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    Web page: http://www.degruyter.com

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    Web: http://www.degruyter.com/view/j/jafio

    Related research

    Keywords: vertical differentiation; non-price competition; advertising;

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    Cited by:
    1. Stefan Napel & Gunnar Oldehaver, 2009. "A Dynamic Perspective on Minimum Quality Standards under Cournot Competition," Working Papers 082, Bavarian Graduate Program in Economics (BGPE).
    2. Garella, Paolo G., 2006. ""Innocuous" minimum quality standards," Economics Letters, Elsevier, vol. 92(3), pages 368-374, September.

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