Title: Strategic and Non-Strategic Differentiation
Abstract:When firms choose the characteristic of their products before output is produced, imperfectly competitive firms may use this characteristic strategically so as to reduce the output level produced by t...When firms choose the characteristic of their products before output is produced, imperfectly competitive firms may use this characteristic strategically so as to reduce the output level produced by the rival. Using a simple two-stage duopoly model, we demonstrate that such 'strategic' use of the product attribute reduces the degree of differentiation between brands. As an outcome each firm loses some market power and competition is more intense. We demonstrate through an example that such reduced differentiation leads to reduced joint profits and reduced welfare.Read More
Publication Year: 1987
Publication Date: 1987-05-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 17
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