To Differentiate or Not to Differentiate: A Question when Some Consumers Are Loyal

I analyze a duopoly that competes first in product characteristics and then in prices. I show that when there exist consumers that are loyal to specific brands with no regard for product characteristics, the second-stage price game doesn’t have a pure-strategy equilibrium or symmetric mixed-strategy equilibrium and the firms choose to maximize their product differentiation in the first stage, contrary to what is usually assumed in the price dispersion literature.

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Year of publication:	2010
Authors:	MENG, Yan
Published in:	Theoretical and Applied Economics. - Asociaţia Generalā a Economiştilor din România - AGER. - Vol. 10(551).2010, 10(551), p. 83-92
Publisher:	Asociaţia Generalā a Economiştilor din România - AGER
Subject:	pricing \| product differentiation \| price competition

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Extent:	application/pdf text/html
Type of publication:	Article
Language:	English
Source:	RePEc - Research Papers in Economics

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