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Targeted Product Design

Author

Listed:
  • Heski Bar-Isaac
  • Guillermo Caruana
  • Vicente Cuñat

Abstract

We propose an intuitive representation of product design in which firms locate inside a circle and consumers in its outer circumference. Designs trade off horizontal and vertical transport costs. Our setting encompasses all linear demand rotations. Firms with lower quality or higher marginal costs choose niche designs that cater to specific consumers at the expense of alienating the rest. Firms choose intermediate designs or more polarized ones, instead, depending on the convexity of the vertical transport cost. We examine such design choices in monopoly, duopoly, and monopolistic competition settings.

Suggested Citation

  • Heski Bar-Isaac & Guillermo Caruana & Vicente Cuñat, 2023. "Targeted Product Design," American Economic Journal: Microeconomics, American Economic Association, vol. 15(2), pages 157-186, May.
    • Handle: RePEc:aea:aejmic:v:15:y:2023:i:2:p:157-86
    DOI: 10.1257/mic.20200474
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    Cited by:

    1. Burak Dindaroglu, 2023. "Product design in monopolistic competition," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(3), pages 471-488, September.
    2. Levaggi, Laura & Levaggi, Rosella, 2023. "Competition in the provision of hospital care: Are mixed markets a valid alternative?," Economic Modelling, Elsevier, vol. 127(C).
    3. Alessandro Ferrari & Lorenzo Pesaresi, 2025. "Specialization, Complexity & Resilience in Supply Chains," Papers 2509.08981, arXiv.org, revised Jan 2026.
    4. Salomé Baslandze & Leo Liu & Elvira Sojli & Wing Wah Tham, 2025. "Foundational Processes and Growth," FRB Atlanta Working Paper 2025-01, Federal Reserve Bank of Atlanta.

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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