Quality Uncertainty Mitigates Product Differentiation
I present the idea that imperfect information about the (vertical) quality characteristics of goods reduces the sellers' incentives for horizontal product differentiation. As a result, the equilibrium outcome may be characterized by "minimum differentiation." In a spatial framework this implies that firms tend to choose head-on competition by agglomerating at the same location. It may happen that consumers benefit from imperfect information about product quality.
Volume (Year): 29 (1998)
Issue (Month): 4 (Winter)
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