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Fat Products

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  • Alexei Alexandrov

Abstract

The economics literature generally considers products as points in some characteristics space. Starting with Hotelling, this served as a convenient assumption, yet with more products being flexible or self-customizable to some degree it makes sense to think that products have positive measure. I develop a model where ?rms can o¤er interval long 'fat' products in the spatial model of differentiation. Contrary to the standard results pro?ts of the firms can decrease with increased differentiation - there is a standard effect of lowering the incentive to cut prices, but there is also an incentive to provide more content sometimes resulting in lower profits. Consumer welfare increases unambiguously with respect to the standard model of Salop. I also find that it is profitable for firms to commit as an industry not to make fat products. If one firm is a leader and another is a follower, the leader accommodates the follower by settling for less pro?ts if differentiation is small.

Suggested Citation

  • Alexei Alexandrov, 2006. "Fat Products," Discussion Papers 1435, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1435
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    Cited by:

    1. Torben Stühmeier, 2019. "Media market concentration and pluralism," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(2), pages 247-259, April.
    2. Bernhardt Dan & Graham Brett, 2015. "Multi-product Bertrand Oligopoly with Exogenous and Endogenous Consumer Heterogeneity," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 15(2), pages 167-209, July.
    3. Oksana Loginova & X. Hnery Wang, 2010. "Customization in an Endogenous-Timing Game with Vertical Differentiation," Working Papers 1008, Department of Economics, University of Missouri.
    4. Oksana Loginova & X. Henry Wang, 2009. "Customization: Ideal Varieties, Product Uniqueness and Price Competition," Economics Bulletin, AccessEcon, vol. 29(4), pages 2573-2581.
    5. Takagoshi, Noritsugu & Matsubayashi, Nobuo, 2013. "Customization competition between branded firms: Continuous extension of product line from core product," European Journal of Operational Research, Elsevier, vol. 225(2), pages 337-352.
    6. Garcia Pires, Armando J., 2014. "Media diversity, advertising, and adaptation of news to readers’ political preferences," Information Economics and Policy, Elsevier, vol. 28(C), pages 28-38.
    7. Loginova, Oksana & Wang, X. Henry, 2013. "Mass customization in an endogenous-timing game with vertical differentiation," Economic Modelling, Elsevier, vol. 33(C), pages 164-173.
    8. Armando J. Garcia Pires, 2017. "Media pluralism and competition," European Journal of Law and Economics, Springer, vol. 43(2), pages 255-283, April.
    9. Oksana Loginova & X. Henry Wang, 2011. "Customization with Vertically Differentiated Products," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(2), pages 475-515, June.
    10. Kopsakangas-Savolainen Maria & Takalo Tuomas, 2014. "Competition Before Sunset: The Case of the Finnish ATM Market," Review of Network Economics, De Gruyter, vol. 13(1), pages 1-33, March.
    11. Bar-Isaac, Heski, 2009. "Breadth, depth, and competition," Economics Letters, Elsevier, vol. 103(2), pages 110-112, May.
    12. Hsu, Wen-Tai & Lu, Yi & Ng, Travis, 2014. "Does competition lead to customization?," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 10-28.
    13. repec:umc:wpaper:0814 is not listed on IDEAS
    14. Markkula, Tuomas & Takalo, Tuomas, 2021. "Competition and regulation in the Finnish ATM industry," BoF Economics Review 8/2021, Bank of Finland.
    15. Armando J. Garcia Pires, 2021. "Net neutrality and content provision," Manchester School, University of Manchester, vol. 89(6), pages 569-593, December.

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    More about this item

    Keywords

    self-customizable products; flexible products; product differentiation;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • 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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