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Product design rivalry: multiple-attributes approach to differentiation

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  • Nobuo Matsubayashi

    (Department of Administration Engineering, Faculty of Science and Technology, Keio University, Yokohama, Japan)

Abstract

This paper studies product design competition between potentially symmetric firms. We specifically employ the multiple-attributes approach as the method of product design. While various product-specific attributes contribute to firms' differentiation, they may cause confusion resulting in consumer dissatisfaction. We show that in the presence of these opposite effects and any setup costs for attributes, the differentiation by multiple attributes is beneficial for firms if, and only if they are moderately competitive. We furthermore show that the socially efficient number of attributes can only be sustained when there are not very many firms and the setup cost is low. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Nobuo Matsubayashi, 2008. "Product design rivalry: multiple-attributes approach to differentiation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(7), pages 555-563.
  • Handle: RePEc:wly:mgtdec:v:29:y:2008:i:7:p:555-563 DOI: 10.1002/mde.1418
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    References listed on IDEAS

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    6. Kilsun Kim & Dilip Chhajed, 2002. "Product Design with Multiple Quality-Type Attributes," Management Science, INFORMS, vol. 48(11), pages 1502-1511, November.
    7. Wernerfelt, Birger, 1986. "Product Line Rivalry: Note," American Economic Review, American Economic Association, vol. 76(4), pages 842-844, September.
    8. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
    9. Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-1579, September.
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