IDEAS home Printed from https://ideas.repec.org/p/ctl/louvir/1997011.html
   My bibliography  Save this paper

Competition through second-hand products when consumers differ in risk aversion

Author

Listed:
  • Grilo, Isabel

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE); Lille III, Gremars)

  • Wauthy, Xavier

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

Abstract

When consumers differ in their attitude towards risk, price competition between products of uncertain characteristics may be analyzed using address-models of product differentiation. These models provide a natural set-up for analyzing industries in which products of different reliability may coexist. This is in particular the case of second-hand markets. For such industries, we characterize the Nash equilibrium in prices and the associated market outcomes. They are shown to depend mainly on the distribution of risk aversion in the population. When the degree of reliability is chosen before price competition takes place, maximal differentiation results, yielding either horizontal or vertical differentiation configurations.

Suggested Citation

  • Grilo, Isabel & Wauthy, Xavier, 1997. "Competition through second-hand products when consumers differ in risk aversion," LIDAM Discussion Papers IRES 1997011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1997011
    as

    Download full text from publisher

    File URL: http://sites.uclouvain.be/econ/DP/IRES/9711.ps
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gabszewicz, Jean J. & Garella, Paolo, 1986. "Subjective price search and price competition," International Journal of Industrial Organization, Elsevier, vol. 4(3), pages 305-316, September.
    2. Anderson, Simon P. & Ginsburgh, Victor A., 1994. "Price discrimination via second-hand markets," European Economic Review, Elsevier, vol. 38(1), pages 23-44, January.
    3. Hirshleifer, J & Riley, John G, 1979. "The Analytics of Uncertainty and Information-An Expository Survey," Journal of Economic Literature, American Economic Association, vol. 17(4), pages 1375-1421, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pasquale Schiraldi, 2006. "Second-Hand Markets and Collusion by Manufacturers of Semidurable Goods," Boston University - Department of Economics - Working Papers Series WP2006-028, Boston University - Department of Economics.
    2. Michael Waldman, 2014. "What limits indirect appropriability?," Chapters, in: Richard Watt (ed.), Handbook on the Economics of Copyright, chapter 2, pages 26-48, Edward Elgar Publishing.
    3. Francisco Alcalá & Miguel González‐Maestre, 2012. "Artistic Creation and Intellectual Property: A Professional Career Approach," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(3), pages 633-672, September.
    4. Ying Wu & Youwei Li, 2022. "Competition or Authorization—Manufacturers’ Choice of Remanufacturing Strategies," Sustainability, MDPI, vol. 14(19), pages 1-29, October.
    5. Clerides, Sofronis & Hadjiyiannis, Costas, 2008. "Quality standards for used durables: An indirect subsidy?," Journal of International Economics, Elsevier, vol. 75(2), pages 268-282, July.
    6. Luis Eeckhoudt & Christian Gollier & Giovanni Immordino, 2001. "How Diagnostic Tests Affect Prevention: a Cost-Benefit Analysis," CSEF Working Papers 53, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    7. Andrew T. Young, 2008. "Replacing incomplete markets with a complete mess: Katrina and the NFIP," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 35(8), pages 561-568, July.
    8. Macauley, Molly, 2006. "Ascribing Societal Benefit to Environmental Observations of the Earth from Space: The Multi-angle Imaging Spectroradiometer (MISR)," RFF Working Paper Series dp-06-09, Resources for the Future.
    9. Sylvain Prado, 2010. "A Family Hitch: Econometrics of the New and the Used Car Markets," Working Papers hal-04140927, HAL.
    10. Gerstle, Ari D. & Waldman, Michael, 2016. "Mergers in durable-goods industries: A re-examination of market power and welfare effects," Research in Economics, Elsevier, vol. 70(4), pages 677-692.
    11. Steinrücken, Torsten, 1999. "Wirtschaftspolitik für offene Kommunikationssysteme: eine ökonomische Analyse am Beispiel des Internet," Ilmenau Economics Discussion Papers 16, Ilmenau University of Technology, Institute of Economics.
    12. Patrick Warren & Tom Wilkening, 2010. "Regulatory Fog: The Informational Origins of Regulatory Persistence," Department of Economics - Working Papers Series 1113, The University of Melbourne.
    13. Shanshan Qian & Dalong Ma & Chao Miao, 2016. "Deciding To Discover Entrepreneurial Opportunities: A Multi-Level Investigation Based On Informational Economics And Resource Dependence Theory," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 21(02), pages 1-19, June.
    14. Rapson, David & Schiraldi, Pasquale, 2013. "Internet and the efficiency of decentralized markets: Evidence from automobiles," Economics Letters, Elsevier, vol. 121(2), pages 232-235.
    15. Konishi, Hideo & Sandfort, Michael T., 2002. "Existence of stationary equilibrium in the markets for new and used durable goods," Journal of Economic Dynamics and Control, Elsevier, vol. 26(6), pages 1029-1052, June.
    16. Ireland, Norman J., 2002. "Firms’ Strategies for Reducing the Effectiveness of Consumer Price Search," Economic Research Papers 269401, University of Warwick - Department of Economics.
    17. Kumar, Praveen, 2002. "Price and quality discrimination in durable goods monopoly with resale trading," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1313-1339, November.
    18. Christian Etter, 1986. "Versicherungsaspekte des Arbeitsverhältnisses: Der Einfluß impliziter Arbeitsverträge auf Löhne und Beschäftigung," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 122(III), pages 405-424, September.
    19. Edi Karni & David Schmeidler, 2016. "An expected utility theory for state-dependent preferences," Theory and Decision, Springer, vol. 81(4), pages 467-478, November.
    20. Claudia Schwirplies, 2015. "Adaptation vs. climate protection: Responses to climate change and policy preferences of individuals in China, Germany, and the USA," MAGKS Papers on Economics 201502, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

    More about this item

    Keywords

    differentiation; risk aversion; risky products;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ctl:louvir:1997011. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Virginie LEBLANC (email available below). General contact details of provider: https://edirc.repec.org/data/iruclbe.html .

    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.