Competition with targeted product design: Price, variety, and welfare

González-Maestre, Miguel; Granero, Luis

doi:10.1016/j.ijindorg.2018.02.009

Cited by 11 publications

(13 citation statements)

References 21 publications

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“…Remarkably, our endogenous specialization model shares strong analogies to the spokes (Chen & Riordan, 2007) and "donut" (Bar-Isaac et al, 2021;González-Maestre & Granero, 2018) models for product targeting and the dynamics they represent, even though the modeling approaches are very different. In both models, genericity is associated with higher demand at a lower price-cost margin.…”

mentioning

confidence: 89%

“…Recent studies on product differentiation also reported instances of price-increasing competition (Bertoletti & Etro, 2016;González-Maestre & Granero, 2018;Zhelobodko et al, 2012). In Zhelobodko et al (2012), anticompetitive effects occur due to the structure of underlying preferences.…”

Section: Restricted Entrymentioning

confidence: 99%

“…Bar‐Isaac et al (2012) study the joint decision of location and specialization in a donut‐like geography, finding that high cost firms choose more specific designs. González‐Maestre and Granero (2018) find that the overall level of specialization rises with the number of firms.…”

Section: Introductionmentioning

confidence: 99%

“…Earlier literature has attempted to study specialization choices by competitors by endogenizing the travel cost parameter in the Hotelling‐Salop tradition (Hendel & de Figueiredo, 1997; Hotelling, 1929; Salop, 1979; von Ungern‐Sternberg, 1988; Weitzman, 1994). A newer generation of models have produced spatial representations that have incorporated a targeting effect in product design more meaningfully, namely the spokes (Chen & Riordan, 2007; Reggiani, 2014) and donut (Bar‐Isaac et al, 2021; González‐Maestre & Granero, 2018) models. Chen and Riordan (2007) introduce the spokes model and study its basic properties and implications.…”

Section: Introductionmentioning

confidence: 99%

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Product design in monopolistic competition

Dindaroğlu

2022

Int J of Economic Theory

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We consider a model of monopolistic competition where producers can manipulate an elasticity parameter at an early stage. We interpret this as a choice of product specialization. Lower marginal costs of production lead to more generic products in all equilibria, which lead to fewer varieties under free‐entry. Entry of a new firm increases overall specialization and increases prices, that is, the environment exhibits price‐increasing competition. The loss of consumer surplus due to higher prices and lower consumption is compensated by the value of additional variety, hence entry also increases consumer surplus. Therefore, price‐increasing competition need not be anticompetitive under endogenous specialization.

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mentioning

confidence: 89%

Section: Restricted Entrymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Product design in monopolistic competition

Dindaroğlu

2022

Int J of Economic Theory

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“…In the interest of robustness, we allow for this premium experience to carry an additional per-unit cost c, although our results hold even if c = 0. The conventional horizontal differentiation is captured by the firms' locations on a Salop circle's arc (Balasubramanian, 1998;Bar-Isaac et al, 2014;González-Maestre & Granero, 2018;Salop, 1979).…”

Section: Authorized Sellersmentioning

confidence: 99%

Product diversion by vertically differentiated firms

Smith

Shulman

2022

Production and Operations Management

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Retail sellers authorized to sell a branded product may divert some units to an unauthorized dealer thus enabling the dealer to become a direct competitor. Because these sellers vary in quality, it is often unclear what type of seller is more motivated to participate in diversion. We develop an analytical model to demonstrate how vertically differentiated sellers make diversion decisions responding to an unauthorized dealer under unique circumstances not considered by previous research. The model demonstrates that when diversion occurs, the low‐quality seller can actually earn a greater profit than the high‐quality seller. Furthermore, a higher quality differential can lead to an overall profit loss for the high‐quality seller when both sellers divert. The sellers will divert products to the competing dealer if and only if they are sufficiently similar to each other. The low‐quality seller has an incentive to divert more units in general, and is motivated to divert alone when the quality differential is not too high. Additionally, changes in vertical differentiation have nonmonotonic effects on the sellers. Overall, the results establish seller vertical differentiation as a new key variable in analyzing product diversion and demonstrate its unique consequences for the authorized sellers and the unauthorized dealer.

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Socially Optimal Retail Return Strategies Under the Influence of Endowment Effect

Shirzadeh

Elahi²

2022

Springer Proceedings in Mathematics &Amp; Statistics

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Competition with targeted product design: Price, variety, and welfare

Cited by 11 publications

References 21 publications

Product design in monopolistic competition

Product design in monopolistic competition

Product diversion by vertically differentiated firms

Socially Optimal Retail Return Strategies Under the Influence of Endowment Effect

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