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The Mechanism behind Product Differentiation An Economic Model

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  • Taiji HARASHIMA

    (Department of Economics Kanazawa Seiryo University Japan)

Abstract

The strategy of product differentiation has been viewed as very important in the field of business administration but it has not necessarily been viewed as an important source of large differences in firms profits in the field of economics In this paper this apparent contradiction is examined based on the concepts of ranking preference and value In the proposed model if a product s implicit rank is higher households will purchase the product far more often than competing products even if their qualities are almost identical and the tastes of households are uniformly distributed Even a slight difference in quality can result in a clear difference in implicit ranks and consequently large differences in firms profits Therefore the effects of differentiation are amplified by ranking preference and product differentiation efforts are truly very important for firms

Suggested Citation

  • Taiji HARASHIMA, 2017. "The Mechanism behind Product Differentiation An Economic Model," Journal of Advanced Research in Management, ASERS Publishing, vol. 8(2), pages 95-111.
    • Handle: RePEc:srs:jarm00:v:8:y:2017:i:2:p:95-111
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    Cited by:

    1. Harashima, Taiji, 2019. "Why Is Executive Compensation So High? A Model of Executive Compensation," MPRA Paper 91326, University Library of Munich, Germany.
    2. Harashima, Taiji, 2018. "Superstars in Team Sports: An Economic Model," MPRA Paper 86360, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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