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The differentiation triangle

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Author Info

  • Marcel Canoy

    (University of Tilburg)

  • Martin Peitz

    (Universidad de Alicante)

Abstract

The paper formalizes the observation that submarkets for high-quality and low-quality variants are markedly different from each other. We study a simple model where variants of low quality cannot be horizontally differentiated, whereas customers disagree about the value of variants in the high-quality range. We determine the outcome under price competition in the differentiation triangle with sequential entry when each firm can develop the vertical product line or decide to follow a niche strategy, i.e. to develop only one variant.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1997-15.pdf
File Function: Fisrt version / Primera version, 1997
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 1997-15.

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Length: 32 pages
Date of creation: Apr 1997
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:1997-15

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Related research

Keywords: Product differentiation; product design; multi-product competition; two-dimensional taste heterogeneity;

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Citations

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Cited by:
  1. Pio Baake & Kay Mitusch, 2009. "Mobile phone termination charges with asymmetric regulation," Journal of Economics, Springer, vol. 96(3), pages 241-261, April.
  2. Degryse, H.A. & Irmen, A., 1997. "Attribute dependence and the provision of quality," Discussion Paper 1997-18, Tilburg University, Center for Economic Research.
  3. Manez, J.A. & Waterson, M., 2001. "Multiproduct Firms and Product Differentiation: a Survey," The Warwick Economics Research Paper Series (TWERPS) 594, University of Warwick, Department of Economics.
  4. Sun, Shaoyan & An, Henry, 2013. "Reputation and Multiproduct-firm Behavior: Product Line and Price Rivalry Among Retailers," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151146, Agricultural and Applied Economics Association.
  5. Kobi Kriesler & Shmuel Nitzan, 2006. "Increasing sales by introducing non-salable items," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(8), pages 631-641.
  6. Coibion, Olivier & Einav, Liran & Hallak, Juan Carlos, 2007. "Equilibrium demand elasticities across quality segments," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 13-30, February.
  7. Degryse, H.A. & Irmen, A., 1998. "On the incentives to provide fuel-efficient automobiles," Discussion Paper 1998-48, Tilburg University, Center for Economic Research.
  8. Andrea Mangani & Paolo Patelli, 2002. "The Max-Min Principle of Product Differentiation: An Experimental Analysis," LEM Papers Series 2002/05, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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