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Entry, Pricing, and Product Design in an Initially Monopolized Market
- Source :
-
Journal of Political Economy . Feb 2004 112(1):188-188. - Publication Year :
- 2004
-
Abstract
- We analyze entry, pricing, and product design in a model with differentiated products. Market equilibrium can be "separating," with multiple sellers and a sorting of heterogeneous consumers across goods, or "exclusionary," with one seller serving all customer types. Entry into an initially monopolized market can occur because of cost reductions or product improvements, but entry need not lower the incumbent's price, improve efficiency, or raise consumer welfare. Post-entry design incentives favor a softening of price competition and stronger market segmentation, whereas exclusionary design changes typically raise consumer welfare. Potential, as distinct from actual, entry always benefits consumers.
Details
- Language :
- English
- ISSN :
- 0022-3808
- Volume :
- 112
- Issue :
- 1
- Database :
- ERIC
- Journal :
- Journal of Political Economy
- Publication Type :
- Academic Journal
- Accession number :
- EJ696089
- Document Type :
- Journal Articles<br />Reports - Research