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Consumer sorting of vertically differentiated goods

  • Ferrier, Peyton
  • Liu, Qihong

This paper shows the conditions for consumer sorting to be profitable. Sorting of low quality goods dampens their substitutability with high quality goods and can raise firm's profit even when sorting lowers profit from low quality sales considered alone.

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File URL: http://www.sciencedirect.com/science/article/B6V84-50K5SWF-1/2/f88c7c5dc3de7b208c1305d3741e9834
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 109 (2010)
Issue (Month): 1 (October)
Pages: 11-13

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Handle: RePEc:eee:ecolet:v:109:y:2010:i:1:p:11-13
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Chalfant, James A. & James, Jennifer S. & Lavoie, Nathalie & Sexton, Richard J., 1999. "Asymmetric Grading Error And Adverse Selection: Lemons In The California Prune Industry," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(01), July.
  2. Acharyya, Rajat, 2005. "Quality discrimination among income constrained consumers," Economics Letters, Elsevier, vol. 86(2), pages 245-251, February.
  3. Philippe Marcoul & John Lawrence, 2007. "Grader Bias in Cattle Markets? Evidence from Iowa," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 890-903.
  4. Ferrier Peyton M, 2007. "Cherry Picking: Should Sellers Let Buyers Sort?," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 5(1), pages 1-32, December.
  5. Stivers, Andrew, 2003. "Quality standards with exogenously distributed quality," Economics Letters, Elsevier, vol. 80(1), pages 131-136, July.
  6. Stivers, Andrew E., 2006. "Optimal number of standards under economies of scope in quality," Economics Letters, Elsevier, vol. 90(3), pages 368-372, March.
  7. Barzel, Yoram, 1977. "Some Fallacies in the Interpretation of Information Costs," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 291-307, October.
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