Markets with Technological Progress: Pricing, Quality, and Novelty

Ludwig von Auer and Mark Trede ()

No 2014-05, Research Papers in Economics from University of Trier, Department of Economics

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 OverLapping 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 pricing policy of firms in the German laser printer market. We show that their pricing corresponds to our model with the seller of the new product acting as the Stackelberg follower.

Keywords: Hotelling; vertical product differentiation; hedonic regression; Stackelberg; laser printer (search for similar items in EconPapers)
JEL-codes: C23 L11 L63 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2014
New Economics Papers: this item is included in nep-mkt
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Citations: View citations in EconPapers (1)

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http://www.uni-trier.de/fileadmin/fb4/prof/VWL/EWF/Research_Papers/2014-05.pdf Second version, 2014 (application/pdf)

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:trr:wpaper:201405

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