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Vertical Product Differentiation in Theory and Practice

Author

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  • Eales James

    (Purdue University, West Lafayette, Indiana, USA)

  • Binkley James K

    (Purdue University, West Lafayette, Indiana, USA)

Abstract

This study examines the role of advertising on consumers' quality perception as a method to vertically differentiate in the baking mix market. Two companies, General Mills and Chelsea Mills have competed head to head since 1930s, using drastically different strategies. General Mills has consistently promoted Bisquick and provided recipes for its use. Chelsea Mills has never advertised its product, Jiffy, preferring instead to minimize cost and provide service to retailers. Both strategies have been successful, resulting in an equilibrium resembling theoretical vertical differentiation models.

Suggested Citation

  • Eales James & Binkley James K, 2003. "Vertical Product Differentiation in Theory and Practice," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 1(1), pages 1-18, September.
    • Handle: RePEc:bpj:bjafio:v:1:y:2003:i:1:n:16
    DOI: 10.2202/1542-0485.1026
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    References listed on IDEAS

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    6. Giancarlo Moschini, 1995. "Units of Measurement and the Stone Index in Demand System Estimation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(1), pages 63-68.
    7. Asher Wolinsky, 1983. "Prices as Signals of Product Quality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(4), pages 647-658.
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    Cited by:

    1. Stefan Napel & Gunnar Oldehaver, 2011. "A dynamic perspective on minimum quality standards under Cournot competition," Journal of Regulatory Economics, Springer, vol. 39(1), pages 29-49, February.
    2. Farzin, Y. H. & Akao, K. I., 2008. "Environmental Quality in a Differentiated Duopoly Facing a Minimum Quality Standard," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 271509, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Garella, Paolo G., 2006. ""Innocuous" minimum quality standards," Economics Letters, Elsevier, vol. 92(3), pages 368-374, September.
    4. Stefan Lutz & Mina Baliamoune-Lutz, 2003. "Mutual Recognition of National Minimum Quality Standards may Support International Convergence," Journal of Industry, Competition and Trade, Springer, vol. 3(4), pages 293-311, December.

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