Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104554
Authors: 
von Auer, Ludwig
Trede, Mark
Year of Publication: 
2014
Series/Report no.: 
Research Papers in Economics 5/14
Abstract: 
New and old products differ in two respects: quality and newness. Whereas a higher quality of a new product always benefits consumers, the newness itself benefits some consumers, but not others, and for some, it is even a disadvantage. We capture these features in a Hotelling model of OverLapping Innovators (HOLI model), entailing a sequence of static Hotelling games of horizontal product differentiation (newness), that we extend by vertical product differentiation (quality). In this model, the firms compete on quality and price. Using advanced dynamic hedonic regression methods, we empirically investigate the pricing policy of firms in the German laser printer market. We show that their pricing corresponds to our model with the entrant acting as the Stackelberg follower.
Subjects: 
hotelling
vertical product differentiation
hedonic regression
Stackelberg
laser printer
JEL: 
L11
L63
C23
Document Type: 
Working Paper

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