Premium
La tarification d’une ligne de produits dans un oligopole verticalement différencié .
Author(s) -
Deltas George,
Stengos Thanasis,
Zacharias Eleftherios
Publication year - 2011
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/j.1540-5982.2011.01660.x
Subject(s) - cannibalization , price discrimination , product (mathematics) , oligopoly , value (mathematics) , economics , microeconomics , competition (biology) , product differentiation , quality (philosophy) , product line , frontier , constant (computer programming) , price premium , industrial organization , business , willingness to pay , cournot competition , history , ecology , philosophy , programming language , geometry , mathematics , archaeology , epistemology , machine learning , computer science , engineering , biology , manufacturing engineering
This paper examines the joint pricing decision of products in a firm’s product line. When products are distinguished by a vertical characteristic, those with higher values of that characteristic will command higher prices. We investigate whether, holding the value of the characteristic constant, there is an additional price premium for products on the industry and/or the firm frontier, that is, for the products with the highest value of the characteristic in the market or in a firm’s product line. We also investigate the existence of price premia for lower‐ranked products and other product line pricing questions. Using personal computer price data, we show that prices decline with the distance from the industry and firm frontiers, even after holding absolute quality constant. We find evidence that consumer tastes for brands is stronger for the consumers of frontier products (and thus competition between firms weaker in the top end of the market). There is also evidence that a product’s price is higher if a firm offers products with the immediately faster and immediately slower computer chip (holding the total number of a firm’s offerings constant), possibly as an attempt to reduce cannibalization. Finally, a product’s price declines with the time it is offered by a firm, suggesting intertemporal price discrimination.