MULTIPRODUCT QUALITY COMPETITION:FIGHTING BRANDS AND PRODUCT LINE PRUNING

Firms selling multiple quality-differentiated products frequently alter theirproduct lines when a competitor enters the market. We present a model of multiproductmonopoly and duopoly using a general “upgrades” approach that yields a powerfulanalytical framework. We provide a simple theoretical explanation for the common strategiesof using “fighting brands” and of product line “pruning.” We also present a generalcondition that guarantees that a monopolist will forsake market segmentation opportunitiesand sell but a single product. A number of previously studied issues can be addressedby our model, including inter-temporal price discrimination and “damaged goods.”...