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Fuzzy products

Author

Listed:
  • Heyes, Anthony
  • Martin, Steve

Abstract

A fuzzy product (FP) has characteristics specified only imprecisely at time of sale. Building fuzziness into its product gives a firm flexibility to exploit favorable supply opportunities that arise between sale and delivery, and so reduce expected costs. While increased competition reduces price, the effect on fuzziness is ambiguous. Socially-optimal fuzziness is characterized. Firms provide goods that are too fuzzy compared to first-best, though entry serves to correct this inefficiency for certain types of goods. Considering competition with a niche good, a FP sells for a lower price, although it captures a larger market share and is more profitable.

Suggested Citation

  • Heyes, Anthony & Martin, Steve, 2016. "Fuzzy products," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 1-9.
    • Handle: RePEc:eee:indorg:v:45:y:2016:i:c:p:1-9
    DOI: 10.1016/j.ijindorg.2015.12.003
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Contracting; Horizontal differentiation; Monopolistic competition; Experience goods;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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