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Entry-Level Products with Consumer Learning

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  • Johnson Justin P

    () (Cornell)

Abstract

Dynamic motivations for the use of product line extensions in the form of entry-level products are considered. When consumers are uncertain of their valuations for products, and their purchasing power evolves over time, firms competing in a lucrative luxury market may try to influence the future buying decisions of young consumers. Offering entry-level products allows young consumers to experiment and thereby make better future decisions. Despite this efficiency, so providing information to consumers need not benefit a firm. The dynamic motivations for offensive product introductions differ discretely from defensive introductions.

Suggested Citation

  • Johnson Justin P, 2005. "Entry-Level Products with Consumer Learning," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-33, September.
  • Handle: RePEc:bpj:bejeap:v:contributions.4:y:2005:i:1:n:9
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    Cited by:

    1. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.

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