Demand for customized products, production flexibility, and price competition
Abstract: "The authors examine markets where, in addition to production of standard (core) products, mass customization is technologically feasible. They compare a setting where a monopolist provides both standard and custom goods to a setting where...
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Abstract: "The authors examine markets where, in addition to production of standard (core) products, mass customization is technologically feasible. They compare a setting where a monopolist provides both standard and custom goods to a setting where an entrant joins the custom market, and find customers' tastes affect the social desirability of entry. The entrant is unconcerned about the impact of his custom production on the incumbent's core product market and in some cases may supply more custom products than is socially desirable. In contrast to previous literature, we show that increased variability of demand may lead to a reduction in investment in flexible production technologies." (author's abstract)
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Endogenous switching costs and the incentive for high quality entry
Abstract: "This paper analyzes how the strategic use of switching costs by an incumbent influences entry, price competition and the entrant’s incentive to introduce a high quality product, in a market with vertically differentiated goods. We can...
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Abstract: "This paper analyzes how the strategic use of switching costs by an incumbent influences entry, price competition and the entrant’s incentive to introduce a high quality product, in a market with vertically differentiated goods. We can prove the existence of a unique subgame perfect equilibrium whose characteristics depends on the costs of developing quality. If these costs are low, the entrant strongly differentiates its product and price competition is tougher than without switching costs. If the costs of product's quality are in the middle range, the entrant differentiates its product less and each firm specializes on a group of customers. This implies a less competitive industry since both suppliers have market power over their purchasers. If the costs of differentiation are high enough, entry is deterred through the strategic use of switching costs. Furthermore we can show that the entrant always underinvests in quality when compared to the case of no switching costs. The equi
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