We provide an explanation for product versioning that is not driven by differential costs or consumer preference heterogeneity, and investigate its implications. Consumers care whether a product they own is better than that owned by others, and whether others own a better product than them....

Matched Model price indexes are generally thought to over-estimate the quality-adjusted price level. This bias stems from the fact that only a fraction of the models are sold in consecutive sampling periods and that the price/performance ratio of these models is worse than that of new models....

We show that the entry of a second firm in a horizontally differentiated market (ala Hotelling) may harm consumers as prices increase and consumer's surplus possibly decrease. We first derive the price and the consumer's surplus of a monopoly which is located at the center of the market. When a...