Product Repositioning in a Horizontally Differentiated Market

Hiroki Kishihara, Nobuo Matsubayashi

Research output: Contribution to journalArticlepeer-review

Abstract

We study product repositioning between firms with predetermined base positions for their products in existing markets. Based on Hotelling’s linear city model, we attempt to generalize models in past studies by encompassing asymmetric base positions and asymmetric cost-efficiency in repositioning. We find that neither base products nor new products in attractive positions in the market necessarily imply competitive advantage. In particular, a potentially cost-inefficient firm can earn higher profits than does a rival, even though the former firm’s product is in a less attractive position. We also clarify the welfare implications for regulating or encouraging firms’ repositioning activities.

Original languageEnglish
Pages (from-to)701-718
Number of pages18
JournalReview of Industrial Organization
Volume57
Issue number3
DOIs
Publication statusPublished - 2020 Nov 1

Keywords

  • Core product
  • Hotelling’s duopoly
  • Repositioning cost

ASJC Scopus subject areas

  • Economics and Econometrics
  • Strategy and Management
  • Organizational Behavior and Human Resource Management
  • Management of Technology and Innovation

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