Abstract
A fuzzy product (FP) has characteristics specified only imprecisely at time of sale. Building fuzziness into its product gives a firm flexibility to exploit favorable supply opportunities that arise between sale and delivery, and so reduce expected costs. While increased competition reduces price, the effect on fuzziness is ambiguous. Socially-optimal fuzziness is characterized. Firms provide goods that are too fuzzy compared to first-best, though entry serves to correct this inefficiency for certain types of goods. Considering competition with a niche good, a FP sells for a lower price, although it captures a larger market share and is more profitable.
| Original language | English |
|---|---|
| Pages (from-to) | 1-9 |
| Number of pages | 9 |
| Journal | International Journal of Industrial Organization |
| Volume | 45 |
| DOIs | |
| Publication status | Published - 1 Mar 2016 |
Bibliographical note
Publisher Copyright:© 2015 Published by Elsevier B.V.
Keywords
- Contracting
- Experience goods
- Horizontal differentiation
- Monopolistic competition
ASJC Scopus subject areas
- Industrial relations
- Aerospace Engineering
- Economics and Econometrics
- Economics, Econometrics and Finance (miscellaneous)
- Strategy and Management
- Industrial and Manufacturing Engineering