Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/234565
Authors: 
Oertel, Christian
Schmutzler, Armin
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 386
Abstract: 
We analyze entry of a firm with a new and differentiated product into a market with two properties: An existing incumbent has a captive consumer base, and all consumers have heterogeneous tastes. The interaction of the share of captive consumers with the degree of taste heterogeneity leads to non-monotone effects of both parameters on entry. In particular, a higher captive share can support entry when heterogeneity is low but not when it is high, and higher taste heterogeneity (i.e., less product substitutability) can impede entry in the presence of captive consumers. Considering these effects together leads to new insights on entry, horizontal product innovation, and price discrimination.
Subjects: 
Entry
captive consumers
asymmetric competition
product innovation
JEL: 
L13
L40
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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