If it's all the same to you: blurred consumer perception and market structure

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  • Edward John Dorrell Webb
Consumers with bounded perception treat sufficiently similar goods as homogeneous. The effects of bounded perception on a vertically differentiated duopoly with sequential quality choice are examined. When quality entails fixed costs the market becomes more concentrated. When quality entails marginal costs, the second mover may profitably imitate the product of its rival, and the market is either more or less concentrated depending on how bounded perception is. When firms incur entry costs, neither firm may opt to produce when quality entails marginal costs, whereas at least one firm always produces when quality entails fixed costs.
TidsskriftReview of Industrial Organization
Udgave nummer1
Sider (fra-til)1-25
Antal sider25
StatusUdgivet - feb. 2017

ID: 160056636