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On Firms' Preferences for Product Differentiation

Author

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  • Rajeev Tyagi

    (University of California, Irvine)

Abstract

We examine firms' preferences for product differentiation when a firm has a demand-side and/or a cost-side advantage over its competitor. We show that if the magnitude of these advantages is small, then both firms prefer more differentiated products. However, if the magnitude of demand-side (cost-side) advantage is larger, then only the advantaged (disadvantaged) firm prefers more differentiated products.

Suggested Citation

  • Rajeev Tyagi, 2005. "On Firms' Preferences for Product Differentiation," Economics Bulletin, AccessEcon, vol. 12(17), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-05l10023
    as

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    References listed on IDEAS

    as
    1. Irmen, Andreas & Thisse, Jacques-Francois, 1998. "Competition in Multi-characteristics Spaces: Hotelling Was Almost Right," Journal of Economic Theory, Elsevier, vol. 78(1), pages 76-102, January.
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    More about this item

    Keywords

    Competition;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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