If it's all the same to you: blurred consumer perception and market structure
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If it's all the same to you : blurred consumer perception and market structure. / Webb, Edward John Dorrell.
In: Review of Industrial Organization, Vol. 50, No. 1, 02.2017, p. 1-25.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - If it's all the same to you
T2 - blurred consumer perception and market structure
AU - Webb, Edward John Dorrell
PY - 2017/2
Y1 - 2017/2
N2 - 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.
AB - 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.
KW - Faculty of Social Sciences
KW - Perception
KW - Similarity
KW - Bounded rationality
KW - Bertrand competition
KW - Vertical differentiation
KW - Oligopoly
U2 - 10.1007/s11151-016-9512-5
DO - 10.1007/s11151-016-9512-5
M3 - Journal article
VL - 50
SP - 1
EP - 25
JO - Review of Industrial Organization
JF - Review of Industrial Organization
SN - 0889-938X
IS - 1
ER -
ID: 160056636