Fuzzy products

Anthony Heyes and Steve Martin ()

International Journal of Industrial Organization, 2016, vol. 45, issue C, 1-9

Abstract: A fuzzy product (FP) has characteristics specified only imprecisely at time of sale. Building fuzziness into its product gives a firm flexibility to exploit favorable supply opportunities that arise between sale and delivery, and so reduce expected costs. While increased competition reduces price, the effect on fuzziness is ambiguous. Socially-optimal fuzziness is characterized. Firms provide goods that are too fuzzy compared to first-best, though entry serves to correct this inefficiency for certain types of goods. Considering competition with a niche good, a FP sells for a lower price, although it captures a larger market share and is more profitable.

Keywords: Contracting; Horizontal differentiation; Monopolistic competition; Experience goods (search for similar items in EconPapers)
JEL-codes: D81 D86 L11 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:45:y:2016:i:c:p:1-9

DOI: 10.1016/j.ijindorg.2015.12.003

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