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Product Customization in the Spokes Model

Author

Listed:
  • Aoki, Reiko
  • Hillas, John
  • Kao, Tina

Abstract

We use a spokes model to analyze ?ms?customization incentives when facing the choices of standard and niche products. Products at or near the end of the spokes are customized products, while products near the origin are more standardized products that cater to the taste of many consumers. Our results indicate that although monopolist always offers the standard product, if a ?m anticipates entry, it may choose to stake claim to a customized product. For low transportation costs, the early entrant chooses the standard product. But this equilibrium is characterized by aggressive pricing behavior.

Suggested Citation

  • Aoki, Reiko & Hillas, John & Kao, Tina, 2014. "Product Customization in the Spokes Model," CEI Working Paper Series 2014-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2014-8
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/28318/wp2014-8.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    product differentiation; product customization; entry; spatial oligopoly;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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