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Cost leadership and pricing in conspicuous goods markets

Listed author(s):
  • S. Sajeesh


    (Baruch College, City University of New York)

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    We study competitive positioning and pricing strategies in markets with negative consumption externalities. Negative consumption externality is modeled as a decrease in preference for a product as more consumers purchase the same product. Using a two stage Hotelling type model, we show that a cost leader prices higher than the cost disadvantaged firm when the magnitude of negative consumption externality in the market is below a threshold otherwise the cost leader prices lower than the cost disadvantaged firm. Also, increase in population density decreases price differential between the cost leader and the cost disadvantaged firm.

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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 30 (2010)
    Issue (Month): 4 ()
    Pages: 3348-3354

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    Handle: RePEc:ebl:ecbull:eb-10-00520
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