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Product Lines and Price Discrimination in the European Car Market

Author

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  • GINSBURGH, Victor

    (CEME, Université Libre de Bruxelles and CORE, Université catholique de Louvain)

  • WEBER, Shlomo

    (Southern Methodist University, Dallas)

Abstract

In this paper we consider a model of oligopolistic competition where firms make a two-dimensional product line decision. They choose a location in style space, thus, inducing horizontal differentiation, and produce different qualities (a product line) of a given good (vertical differentiation), consumed by a population of customers who differ in their income and preference for style. We prove existence of a non-cooperative equilibrium and show that, as the degree of competition increases, prices approach marginal cost. The approach is used to show that European car producer seem indeed to use product lines to discriminate across EC countries.

Suggested Citation

  • GINSBURGH, Victor & WEBER, Shlomo, 1996. "Product Lines and Price Discrimination in the European Car Market," LIDAM Discussion Papers CORE 1996007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1996007
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp1996.html
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    Cited by:

    1. is not listed on IDEAS
    2. Sílvia Jorge & Cesaltina Pires, 2004. "Delivered versus Mill Nonlinear Pricing in Free Entry Markets," Working Papers de Economia (Economics Working Papers) 22, Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro.
    3. Dvir, Eyal & Strasser, Georg, 2018. "Does marketing widen borders? Cross-country price dispersion in the European car market," Journal of International Economics, Elsevier, vol. 112(C), pages 134-149.
    4. José A. Novo‐Peteiro, 2023. "Product design with attribute dependence," Manchester School, University of Manchester, vol. 91(4), pages 361-385, July.
    5. Gianpaolo Rossini & Paolo Zanghieri, 2008. "What Drives Price Differentials of Consumables in Europe? Size? Affluence? Or Both?," Open Economies Review, Springer, vol. 19(1), pages 121-134, February.

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