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Product Repositioning in a Horizontally Differentiated Market

Author

Listed:
  • Hiroki Kishihara

    (Keio University
    Nippon Steel Corporation)

  • Nobuo Matsubayashi

    (Keio University)

Abstract

We study product repositioning between firms with predetermined base positions for their products in existing markets. Based on Hotelling’s linear city model, we attempt to generalize models in past studies by encompassing asymmetric base positions and asymmetric cost-efficiency in repositioning. We find that neither base products nor new products in attractive positions in the market necessarily imply competitive advantage. In particular, a potentially cost-inefficient firm can earn higher profits than does a rival, even though the former firm’s product is in a less attractive position. We also clarify the welfare implications for regulating or encouraging firms’ repositioning activities.

Suggested Citation

  • Hiroki Kishihara & Nobuo Matsubayashi, 2020. "Product Repositioning in a Horizontally Differentiated Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 701-718, November.
    • Handle: RePEc:kap:revind:v:57:y:2020:i:3:d:10.1007_s11151-019-09736-z
    DOI: 10.1007/s11151-019-09736-z
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    References listed on IDEAS

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