Duopoly and Product Design

10 Pages Posted: 27 Jun 2014

See all articles by Miguel González‐Maestre

Miguel González‐Maestre

University of Murcia, Faculty of Business and Economics, Department of Economic Analysis

Lluís M. Granero

Universitat de València

Date Written: June 25, 2014

Abstract

Competition in product design is considered in the context of a circular duopoly model where each duopolist can choose either a standardized design or a customized version of its product. We examine the circumstances that lead to multiple equilibria, and characterize the type of equilibrium as a function of both the customization costs and the lower bound on the degree of customization. In the welfare analysis, it is shown that the degree of customization offered in equilibrium can be substantially different from the socially optimal level of this variable.

Keywords: competition, product design, standardization

JEL Classification: D43, L11, L13, M31

Suggested Citation

González‐Maestre, Miguel and Granero, Lluís M., Duopoly and Product Design (June 25, 2014). Available at SSRN: https://ssrn.com/abstract=2458889 or http://dx.doi.org/10.2139/ssrn.2458889

Miguel González‐Maestre

University of Murcia, Faculty of Business and Economics, Department of Economic Analysis ( email )

Campus de Espinardo
30100 Murcia
Spain

Lluís M. Granero (Contact Author)

Universitat de València ( email )

Avda. dels Tarongers s/n
València, València 46022
Spain

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