Product Variety and Quality under Monopoly
00:14
When a firm offers a variety of product in response to different consumer tastes, it is
called
horizontal product differentiation
When a first responds to differing consumer willingness to pay for a product’s quality by
offering different qualities of the same product is called
vertical product
differentiation.
7.1 A Spatial Approach to Horizontal Product Differentiation
When a product sold differs in the distance traveled by the consumers, this is an
example of
horizontal product differentiation.
7.2 Monopoly and Horizontal Differentiation
transportation costs are is (
t)
per unit of distance travel.
We assume that in each period each consumer is willing to buy exactly one unit of the
product sold by the monopolist provided that the price paid, including transportation
costs,
(Full Price)
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- Summer '08
- MCMANUS
- Marketing, Monopoly, Supply And Demand, retail outlets, horizontal product differentiation
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