If it's all the same to you: blurred consumer perception and market structure

Edward John Dorrell Webb

    Abstract

    Consumers with bounded perception treat sufficiently similar goods as homogeneous. The effects of bounded perception on a vertically differentiated duopoly with sequential quality choice are examined. When quality entails fixed costs the market becomes more concentrated. When quality entails marginal costs, the second mover may profitably imitate the product of its rival, and the market is either more or less concentrated depending on how bounded perception is. When firms incur entry costs, neither firm may opt to produce when quality entails marginal costs, whereas at least one firm always produces when quality entails fixed costs.
    Original languageEnglish
    JournalReview of Industrial Organization
    Volume50
    Issue number1
    Pages (from-to)1-25
    Number of pages25
    ISSN0889-938X
    DOIs
    Publication statusPublished - 1 Feb 2017

    Keywords

    • Faculty of Social Sciences
    • Perception
    • Similarity
    • Bounded rationality
    • Bertrand competition
    • Vertical differentiation
    • Oligopoly

    Fingerprint

    Dive into the research topics of 'If it's all the same to you: blurred consumer perception and market structure'. Together they form a unique fingerprint.

    Cite this