Premium
Product Lines and Price Discrimination in the European Car Market
Author(s) -
Ginsburgh Victor,
Weber Shlomo
Publication year - 2002
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00286
Subject(s) - product differentiation , competition (biology) , oligopoly , economics , product line , preference , product (mathematics) , price discrimination , microeconomics , marginal cost , space (punctuation) , population , line (geometry) , cournot competition , mathematics , computer science , ecology , geometry , operating system , demography , sociology , engineering , biology , manufacturing engineering
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 the 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 producers seem indeed to use product lines to discriminate across EU countries.