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Product Proliferation and Pricing in a Market with Positional Effects

Research output: Working paper

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Product Proliferation and Pricing in a Market with Positional Effects. / Deltas, George; Zacharias, Eleftherios.
Lancaster: Lancaster University, Department of Economics, 2018. (Economics Working Papers Series).

Research output: Working paper

Harvard

Deltas, G & Zacharias, E 2018 'Product Proliferation and Pricing in a Market with Positional Effects' Economics Working Papers Series, Lancaster University, Department of Economics, Lancaster.

APA

Deltas, G., & Zacharias, E. (2018). Product Proliferation and Pricing in a Market with Positional Effects. (Economics Working Papers Series). Lancaster University, Department of Economics.

Vancouver

Deltas G, Zacharias E. Product Proliferation and Pricing in a Market with Positional Effects. Lancaster: Lancaster University, Department of Economics. 2018 Jul. (Economics Working Papers Series).

Author

Deltas, George ; Zacharias, Eleftherios. / Product Proliferation and Pricing in a Market with Positional Effects. Lancaster : Lancaster University, Department of Economics, 2018. (Economics Working Papers Series).

Bibtex

@techreport{cb3b0064c83142499413bed11980a7b7,
title = "Product Proliferation and Pricing in a Market with Positional Effects",
abstract = "We provide an explanation for product versioning that is not driven by differential costs or consumer preference heterogeneity, and investigate its implications. Consumers care whether a product they own is better than that owned by others, and whether others own a better product than them. These positional effects can induce a firm to offer products of different quality, withthe high quality product becoming more exclusive as these effects strengthen. Consumers with no positional preferences become worse off when the broader market acquires them, except following the introduction of the second product, when some such consumers become better off. Positional preference also reduce total consumer surplus holding the number of products fixed; however, they increase consumer surplus if they lead the firm to introduce a second product ofsufficiently high quality. We discuss empirical implications of the theory.",
keywords = "Relative consumption, status effects, positional externalities, Veblen goods",
author = "George Deltas and Eleftherios Zacharias",
year = "2018",
month = jul,
language = "English",
series = "Economics Working Papers Series",
publisher = "Lancaster University, Department of Economics",
type = "WorkingPaper",
institution = "Lancaster University, Department of Economics",

}

RIS

TY - UNPB

T1 - Product Proliferation and Pricing in a Market with Positional Effects

AU - Deltas, George

AU - Zacharias, Eleftherios

PY - 2018/7

Y1 - 2018/7

N2 - We provide an explanation for product versioning that is not driven by differential costs or consumer preference heterogeneity, and investigate its implications. Consumers care whether a product they own is better than that owned by others, and whether others own a better product than them. These positional effects can induce a firm to offer products of different quality, withthe high quality product becoming more exclusive as these effects strengthen. Consumers with no positional preferences become worse off when the broader market acquires them, except following the introduction of the second product, when some such consumers become better off. Positional preference also reduce total consumer surplus holding the number of products fixed; however, they increase consumer surplus if they lead the firm to introduce a second product ofsufficiently high quality. We discuss empirical implications of the theory.

AB - We provide an explanation for product versioning that is not driven by differential costs or consumer preference heterogeneity, and investigate its implications. Consumers care whether a product they own is better than that owned by others, and whether others own a better product than them. These positional effects can induce a firm to offer products of different quality, withthe high quality product becoming more exclusive as these effects strengthen. Consumers with no positional preferences become worse off when the broader market acquires them, except following the introduction of the second product, when some such consumers become better off. Positional preference also reduce total consumer surplus holding the number of products fixed; however, they increase consumer surplus if they lead the firm to introduce a second product ofsufficiently high quality. We discuss empirical implications of the theory.

KW - Relative consumption

KW - status effects

KW - positional externalities

KW - Veblen goods

M3 - Working paper

T3 - Economics Working Papers Series

BT - Product Proliferation and Pricing in a Market with Positional Effects

PB - Lancaster University, Department of Economics

CY - Lancaster

ER -