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Spreading the Good Apples out: Market Entry Dynamics of Quality Differentiated Products

Author

Listed:
  • Jaimovich, Esteban

    (University of Turin (ESOMAS Department) and Collegio Carlo Alberto)

  • Madzharova, Boryana

    (Central Bank of Ireland, Friedrich-Alexander-Universität Erlangen-Nürnberg, and CESIfo)

  • Merella, Vincenzo

    (University of Cagliari and Prague University of Economics and Busines)

Abstract

The paper investigates firms’ rollout strategies for quality-differentiated products across geographically dispersed markets. Using a theoretical framework that integrates nonhomothetic preferences, we show that premium goods are more likely to enter wealthier markets first, allowing firms to capture higher markups. We find that the main factors influencing the selection of follow-up markets differ by product quality: for premium goods, income levels are the primary determinant of expansion paths, whereas geographic proximity is the main driver for lower-quality products. Using micro-level data from the refrigeration industry, we confirm a significant positive association between market-entry order and income for higherquality products. Furthermore, we observe that follow-up markets tend to be geographically more dispersed for premium goods, reflecting a shift away from proximity-based expansion strategies.

Suggested Citation

  • Jaimovich, Esteban & Madzharova, Boryana & Merella, Vincenzo, 2025. "Spreading the Good Apples out: Market Entry Dynamics of Quality Differentiated Products," Research Technical Papers 18/RT/25, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:18/rt/25
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    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables

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