From Closed to Contestable Markets: Product Differentiation in Indian Durable Consumer Goods Industry
AbstractWe examine the most likely strategy of product differentiation by newly entering multinational firms when market reforms begin in a developing economy. We argue that incumbents in a non contestable protected market do not have the usual advantages of an incumbent as in a standard sequential entry model of contestable markets. In this context we use a model of vertical product differentiation to argue that a new entrant will choose a higher quality product and a higher price given the income distribution profile brought in by the market reforms. We test the propositions empirically on the basis of firm level panel data for five Indian durable consumer goods industries.
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Bibliographic InfoPaper provided by Copenhagen Business School, Department of International Economics and Management in its series Working Papers with number 9-1999.
Length: 20 pages
Date of creation: 30 May 1999
Date of revision:
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Postal: Department of International Economics and Management, Copenhagen Business School, Howitzvej 60, DK-2000 Frederiksberg, Denmark
Phone: +45 3815 2515
Fax: +45 3815 2500
Web page: http://www.cbs.dk/departments/int/
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product differentation; multinational firms; protected markets; market entry; India;
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