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The Differentiation Triangle[Note 1. We thank the general editor, two anonymous referees, and ...]
Author(s) -
Canoy Marcel,
Peitz Martin
Publication year - 1997
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00050
Subject(s) - product differentiation , competition (biology) , quality (philosophy) , outcome (game theory) , simple (philosophy) , product (mathematics) , niche , value (mathematics) , range (aeronautics) , computer science , mathematics , mathematical economics , statistics , biology , engineering , physics , geometry , ecology , philosophy , epistemology , quantum mechanics , cournot competition , aerospace engineering
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.