Consumer Targeting Under Quality Competition In A Liberalized Vertically Differentiated Market
This paper examines consumer targeting by cost-asymmetric home incumbent and foreign entrant under quality and price competition among them in a liberalized home-country market. With the home incumbent offering a price-quality menu before the foreign entrant offers his menu, the extent to which the home incumbent enjoys a home-market advantage over a technologically efficient foreign entrant determines the nature of market segmentation. When the home-market advantage is not too large, the home incumbent targets accommodates entry by targeting only the low-type home consumers. Gains from liberalization, however, depends to a large extent on the distribution of home consumers over different types.
Volume (Year): 30 (2005)
Issue (Month): 1 (June)
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- Acharyya, Rajat, 2005. "Quality discrimination among income constrained consumers," Economics Letters, Elsevier, vol. 86(2), pages 245-251, February.
- Donnenfeld, Shabtai & Weber, Shlomo, 1992. "Vertical product differentiation with entry," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 449-472, September.
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- Acharyya, Rajat, 1998. "Monopoly and product quality: Separating or pooling menu?," Economics Letters, Elsevier, vol. 61(2), pages 187-194, November.
- Thomas J. Prusa & Reiko Aoki, 1997. "Sequential vs. Simultaneous Choice With Endogenous Quality," Departmental Working Papers 199510, Rutgers University, Department of Economics.
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