Name
Abstract | ||
|---|---|---|
We analyze price and quality competition in a vertically differentiated duopoly in which consumers have a preference for variety. The preference for variety is a consequence of diminishing marginal utility for repeated experiences with the same product. We find consumer variety seeking can either soften or intensify price competition, depending on the difference in firm qualities and the strength of consumer preference for variety. When the qualities are similar or the consumer preference for variety is strong, prices and profits are higher than would be obtained in the absence of variety seeking. On the other hand, if qualities differ enough or the preference for variety is weak, stronger preferences for variety are associated with more intense price competition and lower profits. When firms set their qualities before competing on price and the range of feasible qualities is restricted such that variety seeking softens competition, competing firms choose to minimally differentiate themselves from each other. The preference for variety can drive the firms to offer multiunit discounts, and the greater price flexibility from these discounts does not necessarily reduce profits relative to simple unit pricing. This paper was accepted by J. Miguel Villas-Boas, marketing. |
Year | DOI | Venue |
|---|---|---|
2013 | 10.1287/mnsc.1120.1585 | Management Science |
Keywords | Field | DocType |
vertical differentiation,intense price competition,stronger preference,j. miguel villas-boas,quality competition,consumer variety,differentiated duopoly,greater price flexibility,feasible quality,variety-seeking consumers,price competition,consumer preference,competition,pricing,marketing,competitive strategy,differentiation | Variety seeking,Duopoly,Economics,Vertical differentiation,Competitive advantage,Microeconomics,Unit price,Marginal utility,Profit (economics) | Journal |
Volume | Issue | ISSN |
59 | 2 | 0025-1909 |
Citations | PageRank | References |
7 | 0.61 | 2 |
Authors | ||
2 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Robert Zeithammer | 1 | 31 | 5.11 |
| Raphael Thomadsen | 2 | 19 | 2.84 |