Product Customization in the Spokes Model

Reiko Aoki, John Hillas and Tina Kao

No 2014-8, CEI Working Paper Series from Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University

Abstract: We use a spokes model to analyze ?ms?customization incentives when facing the choices of standard and niche products. Products at or near the end of the spokes are customized products, while products near the origin are more standardized products that cater to the taste of many consumers. Our results indicate that although monopolist always offers the standard product, if a ?m anticipates entry, it may choose to stake claim to a customized product. For low transportation costs, the early entrant chooses the standard product. But this equilibrium is characterized by aggressive pricing behavior.

Keywords: product differentiation; product customization; entry; spatial oligopoly (search for similar items in EconPapers)
JEL-codes: L11 L13 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2014-11
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind, nep-mic and nep-mkt
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitcei:2014-8

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