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Market Segmentation by Price-Quality Schedules: Some Evidence from Automobiles

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  • Kwoka, John E, Jr

Abstract

Discrimination among heterogeneous buyers of a product is possible through the use of multiple quality variants. This article quantifies various implications of the standard Mussa-Rosen model of price/quality discrimination as applied to the U.S. automobile industry. It demonstrates that the price-quality variants of a major manufacturer indeed segment the market as predicted by the model. Distortions in the range and nature of products offered, in their prices, and in the resulting consumer surplus in the automobile market are measured and shown to be significant. Copyright 1992 by University of Chicago Press.

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  • Kwoka, John E, Jr, 1992. "Market Segmentation by Price-Quality Schedules: Some Evidence from Automobiles," The Journal of Business, University of Chicago Press, vol. 65(4), pages 615-628, October.
  • Handle: RePEc:ucp:jnlbus:v:65:y:1992:i:4:p:615-28
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    Cited by:

    1. Kauf, Teresa L., 1999. "Price discrimination and bargaining power in the U.S. vaccine market: Implications for childhood immunization policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 39(2), pages 249-265.
    2. Preyas Desai & Sunder Kekre & Suresh Radhakrishnan & Kannan Srinivasan, 2001. "Product Differentiation and Commonality in Design: Balancing Revenue and Cost Drivers," Management Science, INFORMS, vol. 47(1), pages 37-51, January.
    3. Loureiro, Maria L. & Hine, Susan E., 2001. "Discovering Niche Markets: A Comparison Of Consumer Willingness To Pay For A Local (Colorado Grown), Organic, And Gmo-Free Product," 2001 Annual meeting, August 5-8, Chicago, IL 20630, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Ida Ferrara, 2007. "Automobile quality choice under pollution control regulation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(3), pages 353-372, November.
    5. Steven C. Blank & Gary D. Thompson, 2004. "Can/Should/Will A Niche Become the Norm? Organic Agriculture's Short Past and Long Future," Contemporary Economic Policy, Western Economic Association International, vol. 22(4), pages 483-503, October.
    6. David Kauper, 2012. "Teaching Profit Seeking as the Source of Growth," International Review of Economic Education, Economics Network, University of Bristol, vol. 11(2), pages 64-80.
    7. Plourde, Charles & Bardis, Vassilios, 1999. "Fuel economy standards in a model of automobile quality," Energy Economics, Elsevier, vol. 21(4), pages 309-319, August.
    8. Anindya Ghose & Arun Sundararajan, 2005. "Versioning and Quality Distortion in Software? Evidence from E-Commerce Panel Data," Working Papers 05-14, NET Institute, revised Oct 2005.
    9. Landon, Stuart & Smith, Constance, 1997. "The Use of Quality and Reputation Indicators by Consumers: The Case of Bordeaux Wine," MPRA Paper 9283, University Library of Munich, Germany.

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