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The differentiation triangle

Author

Listed:
  • Marcel Canoy

    (University of Tilburg)

  • Martin Peitz

    (Universidad de Alicante)

Abstract

The paper formalizes the observation that submarkets for high-quality and low-quality variants are markedly different from each other. We study a simple model where variants of low quality cannot be horizontally differentiated, whereas customers disagree about the value of variants in the high-quality range. We determine the outcome under price competition in the differentiation triangle with sequential entry when each firm can develop the vertical product line or decide to follow a niche strategy, i.e. to develop only one variant.

Suggested Citation

  • Marcel Canoy & Martin Peitz, 1997. "The differentiation triangle," Working Papers. Serie AD 1997-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1997-15
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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1997-15.pdf
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    Citations

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    Cited by:

    1. Brécard, Dorothée, 2014. "Consumer confusion over the profusion of eco-labels: Lessons from a double differentiation model," Resource and Energy Economics, Elsevier, vol. 37(C), pages 64-84.
    2. Jean-Luc Demeulemeester & Olivier Debande, 2008. "Quality and Variety Competition in Higher Education," Working Papers 08-10, Association Française de Cliométrie (AFC).
    3. José A. Novo-Peteiro, 2020. "Two-dimensional vertical differentiation with attribute dependence," Journal of Economics, Springer, vol. 131(2), pages 149-180, October.
    4. José A. Novo‐Peteiro, 2023. "Product design with attribute dependence," Manchester School, University of Manchester, vol. 91(4), pages 361-385, July.
    5. Degryse, Hans & Irmen, Andreas, 2001. "Attribute dependence and the provision of quality," Regional Science and Urban Economics, Elsevier, vol. 31(5), pages 547-569, September.
    6. Sun, Shaoyan & An, Henry, 2013. "Reputation and Multiproduct-firm Behavior: Product Line and Price Rivalry Among Retailers," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151146, Agricultural and Applied Economics Association.
    7. Andrea Mangani & Paolo Patelli, 2002. "The Max-Min Principle of Product Differentiation: An Experimental Analysis," LEM Papers Series 2002/05, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    8. Coibion, Olivier & Einav, Liran & Hallak, Juan Carlos, 2007. "Equilibrium demand elasticities across quality segments," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 13-30, February.
    9. Pio Baake & Kay Mitusch, 2009. "Mobile phone termination charges with asymmetric regulation," Journal of Economics, Springer, vol. 96(3), pages 241-261, April.
    10. Kobi Kriesler & Shmuel Nitzan, 2006. "Increasing sales by introducing non-salable items," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(8), pages 631-641.
    11. Manez, Juan A. & Waterson, Michael, 2001. "Multiproduct Firms and Product Differentiation: A Survey," Economic Research Papers 269364, University of Warwick - Department of Economics.
    12. Ron Adner & Felipe A. Csaszar & Peter B. Zemsky, 2014. "Positioning on a Multiattribute Landscape," Management Science, INFORMS, vol. 60(11), pages 2794-2815, November.
    13. Hans Degryse & Andreas Irmen, 2001. "On the incentives to provide fuel-efficient automobiles," Journal of Economics, Springer, vol. 73(2), pages 149-165, June.
    14. Yasunori Ishii, 2013. "Special Issue. Guest Editor: Zhihao Yu," Review of Development Economics, Wiley Blackwell, vol. 17(3), pages 571-584, August.
    15. Mehlum, Halvor, 2016. "Another model of sales. Price discrimination in a differentiated duopoly market," Memorandum 12/2016, Oslo University, Department of Economics.
    16. Eales James & Binkley James K, 2003. "Vertical Product Differentiation in Theory and Practice," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 1(1), pages 1-18, September.
    17. Yenipazarli, Arda, 2019. "Incentives for environmental research and development: Consumer preferences, competitive pressure and emissions taxation," European Journal of Operational Research, Elsevier, vol. 276(2), pages 757-769.

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