Title
Product line rivalry and market segmentation : with an application to automobile optional engine pricing Product line rivalry and market segmentation : with an application to automobile optional engine pricing
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Oxford ,
Subject
Economics
Source (journal)
The journal of industrial economics. - Oxford
Volume/pages
47(1999) :4 , p. 399-425
ISSN
0022-1821
1467-6451
ISI
000084024400002
Carrier
E
Target language
English (eng)
Affiliation
University of Antwerp
Abstract
This paper addresses the questions whether and when the pricing practices on base products may differ from those of premium products, sold with options or add-ons. Various alternative models are considered: a monopoly model, a model of brand rivalry with full consumer information and a model of rivalry in which consumers are only well informed about base product prices. Only the brand rivalry model with limited consumer information predicts that premium products have larger percentage markups than base products, provided that brand rivalry is sufficiently intense. Empirical evidence on base and premium product pricing in the automobile market is consistent with the limited information model and inconsistent with the other two models.
E-info
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