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Multiproduct Quality Competition: Fighting Brands and Product Line Pruning

  • Justin P. Johnson
  • David P. Myatt

Firms selling multiple quality-differentiated products frequently alter their product lines when a competitor enters the market. We present a model of multiproduct monopoly and duopoly using a general "upgrades" approach that yields a powerful analytical framework. We provide an explanation for the common strategies of using "fighting brands" and of product line "pruning." The optimal strategy depends on whether entry prompts an incumbent to expand or contract its total output. We also present a general condition that guarantees that a monopolist will sell but a single product. Our model addresses other issues, including intertemporal price discrimination and "damaged goods."

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 3 (June)
Pages: 748-774

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Handle: RePEc:aea:aecrev:v:93:y:2003:i:3:p:748-774
Note: DOI: 10.1257/000282803322157070
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  1. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
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  9. David P. Myatt & Justin P. Johnson, 2005. "Multiproduct Cournot Oligopoly," Economics Series Working Papers 145, University of Oxford, Department of Economics.
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  14. Champsaur, Paul & Rochet, Jean-Charles, 1989. "Multiproduct Duopolists," Econometrica, Econometric Society, vol. 57(3), pages 533-57, May.
  15. David Haugh & Tim Hazledine, 1999. "Oligopoly behaviour in the Trans-Tasman air travel market: The case of kiwi international," New Zealand Economic Papers, Taylor & Francis Journals, vol. 33(1), pages 1-25.
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  17. Raymond J. Deneckere & R. Preston McAfee, 1996. "Damaged Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(2), pages 149-174, 06.
  18. Joanna Stavins, 1996. "Price discrimination in the airline market: the effect of market concentration," Working Papers 96-7, Federal Reserve Bank of Boston.
  19. Jaskold Gabszewicz, Jean & Shaked, Avner & Sutton, John & Thisse, Jacques-Francois, 1986. "Segmenting the market: The monopolist's optimal product mix," Journal of Economic Theory, Elsevier, vol. 39(2), pages 273-289, August.
  20. Haugh, David & Hazledine, Tim, 1999. "Oligopoly Behaviour in the Trans-Tasman Air Travel Market: TheCase of Kiwi International," Working Papers 195, Department of Economics, The University of Auckland.
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