We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Vertical Product Differentiation: Some Basic Themes.
- Authors
Sutton, John
- Abstract
If one asks most people why some firm has a large market share, you are likely to be told that it has "a great product," or words to that effect. That kind of explanation would strike an economist as being less than satisfying, however. There are two difficulties. Rolex watches, like IBM computers, may be an enviable product, but they aren't noted for theft share of the watch market. Having a "better" product presumably means that the demand schedule faced by the firm is shifted further outwards, than would otherwise be the case. But the firm, so advantaged, might find it optimal to take its profit in the form of a higher price rather than in the form of an increased volume of sales. There is also a second difficulty. if this product is so successful, why don't more of its competitors develop similar products? The notion that having a better product is the key to acquiring a large market share and to enhanced profitability, is more popular in business schools than in departments of economics.
- Subjects
PRODUCT differentiation; CORPORATE profits; INDUSTRIAL concentration; IBM computers; VERTICAL marketing; MARKET share; ORGANIZATIONAL structure; ECONOMICS
- Publication
American Economic Review, 1986, Vol 76, Issue 2, p393
- ISSN
0002-8282
- Publication type
Article