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Product Differentiation and Price Competition Between a Safe and a Risky Seller

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  • Winand Emons

Abstract

A safe and risky seller serve a market. While the expensive safe seller can solve the problems of all consumers, the cheap risky seller can help a consumer only with a certain probability. The risky seller's success probabilities are distributed across consumers; by the choice of her quality the risky seller determines the shape of this distribution. If the risky seller fails, a consumer ends up with the safe seller, paying for the service twice. The risky seller chooses a quality-price pair inducing the safe seller to stick to his monopoly strategy. Some but not maximum differentiation results.

Suggested Citation

  • Winand Emons, 2000. "Product Differentiation and Price Competition Between a Safe and a Risky Seller," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 156(3), pages 431-431, September.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200009)156:3_431:pdapcb_2.0.tx_2-l
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. David Bardey & Denis Gromb & David Martimort & Jerome Pouyet, 2016. "Drugs, Showrooms and Financial Products: Competition and Regulation when Sellers Provide Expert Advice," DOCUMENTOS CEDE 015231, UNIVERSIDAD DE LOS ANDES-CEDE.
    2. David Bardey & Denis Gromb & David Martimort & Jérôme Pouyet, 2016. "Drugs, Showrooms and Financial Products: Competition and Regulation when Sellers Provide Expert Advice," PSE Working Papers halshs-01400841, HAL.
    3. Uwe Dulleck & Rudolf Kerschbamer, 2005. "Experts vs. discounters: consumer free riding and experts withholding advice in markets for credence goods," Economics working papers 2005-09, Department of Economics, Johannes Kepler University Linz, Austria.
    4. Dulleck, Uwe & Kerschbamer, Rudolf, 2005. "Experts vs Discounters: Competition and Market Unravelling When Consumers Do Not Know What they Need," CEPR Discussion Papers 5242, C.E.P.R. Discussion Papers.
    5. Dulleck, Uwe & Kerschbamer, Rudolf, 2009. "Experts vs. discounters: Consumer free-riding and experts withholding advice in markets for credence goods," International Journal of Industrial Organization, Elsevier, pages 15-23.
    6. Martin Gächter, 2013. "Retaining the thin blue line: What shapes workers' intentions not to quit the current work environment," International Journal of Social Economics, Emerald Group Publishing, vol. 40(5), pages 479-503, April.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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