Year of Graduation
Competition in Markets with Horizontal Differentiation Goods
Double degree programme in Economics of the NRU HSE and the University of London
Production of the ”right” good in a new market is a challenging task for most compa- nies. We try to solve the problem by considering a horizontal differentiation market under assumptions that consumer preferences’ distribution is ambiguous and ambiguity could be decreased after consumers’ evaluation of demo products that firms produce. Under these assumptions we find out the optima number of demo products which is determined by expected maximum profit in the market and costs of developing of demo products. In model a potential entrant has 3 options - (1) to compete, (2) to take a new niche or (3) to compete partially. The choice depends on attractiveness of new niche and distribution of consumer preferences near the location of incumbent. Finally, studying the model we investigate that demo products could be used as a strategic tool by companies.