The differentiation triangle
AbstractThe 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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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 1997-15.
Length: 32 pages
Date of creation: Apr 1997
Date of revision:
Publication status: Published by Ivie
Product differentiation; product design; multi-product competition; two-dimensional taste heterogeneity;
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