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Strategic Product Line Choice Under Asymmetric Demand Structure

Strategic Product Line Choice Under Asymmetric Demand Structure Abstract We examine strategic product line choices of manufacturers in a stylised duopoly model where products have asymmetric and interdependent market conditions. We characterise the optimal product line decisions and show that manufacturers always prefer to have head-to-head competition (and never segment markets) when product line setup cost is small relative to profitability of the products. When setup costs are high, symmetric manufacturers may prefer to have asymmetric product lines or market segmentation. We show that high setup costs lead to the market segmentation outcome only if there is no significant market size difference and the level of product substitutability is moderate. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Japanese Economic Review Springer Journals

Strategic Product Line Choice Under Asymmetric Demand Structure

Kutlu, Levent; Nakkas, Alper
The Japanese Economic Review , Volume 69 (3): 13 – Sep 1, 2018
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References (21)

Publisher
Springer Journals
Copyright
2018 Japanese Economic Association
ISSN
1352-4739
eISSN
1468-5876
DOI
10.1111/jere.12186
Publisher site
See Article on Publisher Site

Abstract

Abstract We examine strategic product line choices of manufacturers in a stylised duopoly model where products have asymmetric and interdependent market conditions. We characterise the optimal product line decisions and show that manufacturers always prefer to have head-to-head competition (and never segment markets) when product line setup cost is small relative to profitability of the products. When setup costs are high, symmetric manufacturers may prefer to have asymmetric product lines or market segmentation. We show that high setup costs lead to the market segmentation outcome only if there is no significant market size difference and the level of product substitutability is moderate.

Journal

The Japanese Economic Review – Springer Journals

Published: Sep 1, 2018

Keywords: economics, general; microeconomics; macroeconomics/monetary economics//financial economics; econometrics; development economics; economic history

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