IDEAS home Printed from https://ideas.repec.org/a/vep/journl/y2006v114i4p597-612.html
   My bibliography  Save this article

Exogenous and Endogenous Set-up Costs in Markets with Customized Products

Author

Listed:
  • Marcella SCRIMITORE

    (Universita' di Lecce)

Abstract

In this paper we present a model of spatial competition that highlights firms’ customization strategies in an imperfect competitive environment. The nature of competition in markets with products designed according to consumer preferences is discussed both in a framework of exogenous and endogenous set-up costs. Set-up costs are considered endogenous when technology is such that reductions in variable customization costs are feasible at additional set-up costs. It is shown that when set-up costs are exogenous, strategic interaction induces firms to choose the most efficient customization technology, though the latter entails a reduction in prices and profits and a more concentrated market structure. When set-up costs are endogenous, the incentive to choose strategically a more efficient customization technology depends on the possibility to cheaply transfer the customization costs into the set-up costs. This explains why customization is more frequently observed for information goods and in digital markets.

Suggested Citation

  • Marcella SCRIMITORE, 2006. "Exogenous and Endogenous Set-up Costs in Markets with Customized Products," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 114(4), pages 597-612.
  • Handle: RePEc:vep:journl:y:2006:v:114:i:4:p:597-612
    as

    Download full text from publisher

    File URL: http://riss.vitaepensiero.it/scheda-articolo_digital/marcella-scrimitore/exogenous-and-endogenous-set-up-costs-in-markets-with-customized-products-000518_2006_0004_0597-150864.html
    Download Restriction: Yes
    ---><---

    More about this item

    Keywords

    administered prices; regulation; telecommunication network industries; rent;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vep:journl:y:2006:v:114:i:4:p:597-612. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Vep - Vita e Pensiero (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.