Download This PaperDoes Product Differentiation Relax Price Competition? An Experimental Answer
University of Siena Department of Economics Working Paper No. 350
25 Pages Posted: 20 Nov 2002
Date Written: May 2002
Abstract
The literature on product differentiation predicts that firms are likely to differentiate their products in order to relax price competition. We tested this theoretical result in a laboratory setting, by organizing twenty-four markets where products were offered with different quality levels. We compared two treatments which varied only in the degree of exogenous quality differentiation. The main result was that higher product differentiation determines low price competition and thus higher prices.
JEL Classification: C92, D43, L13
Suggested Citation: Suggested Citation
Mangani, Andrea, Does Product Differentiation Relax Price Competition? An Experimental Answer (May 2002). University of Siena Department of Economics Working Paper No. 350, Available at SSRN: https://ssrn.com/abstract=315370 or http://dx.doi.org/10.2139/ssrn.315370
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