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Product Lines and Price Discrimination in the European Car Market

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  • Victor Ginsburgh
  • Shlomo Weber

Abstract

In this paper we consider a model of oligopolistic competition where firms make a two‐dimensional product line decision. They choose a location in style space, thus inducing horizontal differentiation, and produce different qualities (a product line) of a given good (vertical differentiation), consumed by a population of customers who differ in their income and preference for style. We prove the existence of a non‐cooperative equilibrium and show that, as the degree of competition increases, prices approach marginal cost. The approach is used to show that European car producers seem indeed to use product lines to discriminate across EU countries.

Suggested Citation

  • Victor Ginsburgh & Shlomo Weber, 2002. "Product Lines and Price Discrimination in the European Car Market," Manchester School, University of Manchester, vol. 70(1), pages 101-114, January.
    • Handle: RePEc:bla:manchs:v:70:y:2002:i:1:p:101-114
    DOI: 10.1111/1467-9957.00286
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    References listed on IDEAS

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    1. Gilbert, Richard J & Matutes, Carmen, 1993. "Product Line Rivalry with Brand Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 41(3), pages 223-240, September.
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    Cited by:

    1. Sílvia Ferreira Jorge & Cesaltina Pacheco Pires, 2004. "Delivered versus Mill Nonlinear Pricing in Free Entry Markets," Microeconomics 0409006, University Library of Munich, Germany.
    2. Dvir, Eyal & Strasser, Georg, 2018. "Does marketing widen borders? Cross-country price dispersion in the European car market," Journal of International Economics, Elsevier, vol. 112(C), pages 134-149.
    3. José A. Novo‐Peteiro, 2023. "Product design with attribute dependence," Manchester School, University of Manchester, vol. 91(4), pages 361-385, July.
    4. Gianpaolo Rossini & Paolo Zanghieri, 2008. "What Drives Price Differentials of Consumables in Europe? Size? Affluence? Or Both?," Open Economies Review, Springer, vol. 19(1), pages 121-134, February.

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