Targeted Product Design

Heski Bar-Isaac, Guillermo Caruana and Vicente Cuñat

American Economic Journal: Microeconomics, 2023, vol. 15, issue 2, 157-86

Abstract: We propose an intuitive representation of product design in which firms locate inside a circle and consumers in its outer circumference. Designs trade off horizontal and vertical transport costs. Our setting encompasses all linear demand rotations. Firms with lower quality or higher marginal costs choose niche designs that cater to specific consumers at the expense of alienating the rest. Firms choose intermediate designs or more polarized ones, instead, depending on the convexity of the vertical transport cost. We examine such design choices in monopoly, duopoly, and monopolistic competition settings.

JEL-codes: D21 D24 D42 D43 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1257/mic.20200474

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