Product Repositioning in a Horizontally Differentiated Market

Hiroki Kishihara () and Nobuo Matsubayashi ()
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Hiroki Kishihara: Keio University
Nobuo Matsubayashi: Keio University

Review of Industrial Organization, 2020, vol. 57, issue 3, No 10, 718 pages

Abstract: Abstract We study product repositioning between firms with predetermined base positions for their products in existing markets. Based on Hotelling’s linear city model, we attempt to generalize models in past studies by encompassing asymmetric base positions and asymmetric cost-efficiency in repositioning. We find that neither base products nor new products in attractive positions in the market necessarily imply competitive advantage. In particular, a potentially cost-inefficient firm can earn higher profits than does a rival, even though the former firm’s product is in a less attractive position. We also clarify the welfare implications for regulating or encouraging firms’ repositioning activities.

Keywords: Hotelling’s duopoly; Core product; Repositioning cost (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s11151-019-09736-z

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