Product Differentiation in a Market with Endogenous Sequential Entry
Volume: Volume 11, No. 1
Issue: Spring 1980
Pages: pp. 237-260
Authors: W.J. Lane
Title: Product Differentiation in a Market with Endogenous Sequential Entry
Abstract: This article constructs a descriptive model of a market with differentiated consumers and products in which both prices and product specifications are endogenous and in which entry is endogenous and sequential. We show that there is a unique equilibrium in product specifications and prices in which firms will charge different prices and produce products with different characteristics to meet the diverse preferences of consumers. Fixed costs together with free sequential entry imply that there are product choice strategies by which existing firms can effectively deter entry and thus secure positive profits.
JEL Classification
General Equilibrium and Disequilibrium Theory (0210)
Microeconomics Theory of Firm and Industry under Imperfectly Competitive Market Structures (0226)