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来源类型Working Paper
规范类型报告
DOI10.3386/w7494
来源IDWorking Paper 7494
If at First You Don't Succeed...: Profits, Prices and Market Structure in a Model of Quality with Unknowable Consumer Heterogeneity
Kala Krishna; Tor Winston
发表日期2000
出版年2000
语种英语
摘要Why are higher quality niches seen as intrinsically more profitable in business circles? Why do high quality products sometimes have a low real price, while it is unusual to see low quality products with high real prices? Can markets have quality differentiation as well as quality bunching? In this paper we develop a new model of quality which explains such phenomena. Our model builds on the idea that even if a customer chooses to purchase a product, it may fail to deliver'. If a product fails to deliver, the customer may wish to choose some other product. A higher quality product has a higher probability of delivering. We model this as a three stage game where firms first choose whether to enter or not, then in the second stage choose their quality and in the last stage, their price. Our model has a number of interesting predictions. First, it suggests that in equilibrium, a wider range of price per unit of quality is to be found for high quality goods than for low quality ones. Second, it provides a theoretical reason for why high quality niches may be more profitable, supporting the common business school idea that the money is at the high end.' Third, it suggests that the nature of the fixed costs of establishing quality plays a critical role in determining when free entry could be consistent with the existence of profits and result in natural oligopolies' and when it would tend to eliminate all profits.
主题Microeconomics ; Market Structure and Distribution ; Welfare and Collective Choice
URLhttps://www.nber.org/papers/w7494
来源智库National Bureau of Economic Research (United States)
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条目标识符http://119.78.100.153/handle/2XGU8XDN/565040
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Kala Krishna,Tor Winston. If at First You Don't Succeed...: Profits, Prices and Market Structure in a Model of Quality with Unknowable Consumer Heterogeneity. 2000.
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