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Product Differentiation in a Vertical Structure

Han, Tien-Der; Haque, M Emranul; Mukherjee, Arijit

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Authors

Tien-Der Han

M Emranul Haque

ARIJIT MUKHERJEE Arijit.Mukherjee@nottingham.ac.uk
Professor of Industrial Economics



Abstract

We consider final goods producers' preference for horizontal product differentiation in the presence of strategic input price determination. Final goods producers may not prefer maximal differentiation but may prefer moderate differentiation under both Cournot and Bertrand competition in the final goods market if product differentiation does not increase the market size significantly and there is either free entry in the input market or the input supplier has increasing returns to scale technology. Thus, we provide a new rationale for moderate product differentiation. Our reasons are different from the existing reasons of mixed pricing strategy, endogenous leadership, no-buy option for the consumers and the relative performance incentive schemes.

Citation

Han, T., Haque, M. E., & Mukherjee, A. (2022). Product Differentiation in a Vertical Structure. BE Journal of Theoretical Economics, 22(1), 105-122. https://doi.org/10.1515/bejte-2020-0037

Journal Article Type Article
Acceptance Date Sep 27, 2020
Online Publication Date Nov 16, 2020
Publication Date 2022-01
Deposit Date Sep 28, 2020
Publicly Available Date Mar 29, 2024
Journal The B.E. Journal of Theoretical Economics
Electronic ISSN 1935-1704
Publisher De Gruyter
Peer Reviewed Peer Reviewed
Volume 22
Issue 1
Pages 105-122
DOI https://doi.org/10.1515/bejte-2020-0037
Keywords Entry; Final goods; Increasing returns; Input; Product differentiation
Public URL https://nottingham-repository.worktribe.com/output/4932238
Publisher URL https://www.degruyter.com/view/journals/bejte/ahead-of-print/article-10.1515-bejte-2020-0037/article-10.1515-bejte-2020-0037.xml

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