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Input specificity and product differentiation

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Author Info
Noriaki Matsushima
Tomomichi Mizuno

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Abstract

Using a simple product differentiation model with elastic demands, we investigate the relationship between differentiation strategies and vertical relations. Depending on the competitive structure in the upstream market, three differentiation patterns (maximum, minimum and partial differentiation) can appear in equilibrium even though each downstream firm freely determines the degree of product differentiation. When downstream firms must incur positive investment costs to differentiate their products, they tend to do so if the upstream market is competitive.

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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0745.

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Date of creation: Jun 2009
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Handle: RePEc:dpr:wpaper:0745

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  9. Andrea Mantovani, 2006. "Complementarity between product and process innovation in a monopoly setting," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 15(3), pages 219-234, April. [Downloadable!] (restricted)
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  10. Bonaccorsi, Andrea & Giuri, Paola, 2001. "The long-term evolution of vertically-related industries," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1053-1083, July. [Downloadable!] (restricted)
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  11. Norman, George & Thisse, Jacques-Francois, 1999. "Technology Choice and Market Structure: Strategic Aspects of Flexible Manufacturing," Journal of Industrial Economics, Blackwell Publishing, vol. 47(3), pages 345-72, September. [Downloadable!] (restricted)
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  12. Paul Belleflamme & Eric Toulemonde, 2003. "Product differentiation in successive vertical oligopolies," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 523-545, August. [Downloadable!] (restricted)
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  13. Stefan Buehler & Armin Schmutzler, 2004. "Intimidating Competitors – Endogenous Vertical Integration and Downstream Investment in Successive Oligopoly," Working Papers 0409, University of Zurich, Socioeconomic Institute, revised Jul 2005. [Downloadable!]
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  14. Milliou, Chrysovalantou, 2004. "Vertical integration and R&D information flow: is there a need for 'firewalls'?," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 25-43, January. [Downloadable!] (restricted)
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  17. Brocas, Isabelle, 2003. "Vertical integration and incentives to innovate," International Journal of Industrial Organization, Elsevier, vol. 21(4), pages 457-488, April. [Downloadable!] (restricted)
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