Markets with Technological Progress: Pricing, Quality and Novelty

Ludwig von Auer and Mark Trede ()

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: New and old products differ in two respects: quality and newness. Whereas a higher quality of a new product always benefits consumers, the newness itself benefits some consumers, but not others, and for some, it is even a disadvantage. We capture these features in a Hotelling model of Over- Lapping Innovators (HOLI model), entailing a sequence of static Hotelling games of horizontal product differentiation (newness), that we extend by vertical product differentiation (quality). In this model the firms compete on quality and price. Using advanced dynamic hedonic regression methods, we empirically investigate the actual pricing of firms in the German laser printer market. We show that their pricing corresponds to our model with the entrant acting as the Stackelberg follower.

JEL-codes: C23 L11 L63 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-com, nep-ind and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Markets with technological progress: pricing, quality, and novelty (2018)
Working Paper: Markets with Technological Progress: Pricing Quality, and Novelty (2014)
Working Paper: Markets with Technological Progress: Pricing, Quality, and Novelty (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100581

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