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AA00260492-20120000-0055.pdf
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Download
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:1.8 MB
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:Dec 12, 2012 |
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Total downloads since Dec 12, 2012 : 1208
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| Title |
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Monopolistic choice of product specifications when higher end product specifications provide imperfect signals of the performance of the low end product
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Ghosh, Deepa
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Economics Department, East Calcutta Girls' College, Kolkata, India
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Morita, Bhaswar
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Economics Department, Jadavpur University, Kolkata, India
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Keio Economic Society, Keio University
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2012
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Keio economic studies
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48
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2012
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55
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67
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In this paper we introduce the possibility that customers can only observe technical specifications and are unable to identify the exact performance level of a product a priori. We explore the possibility that firms making technically sophisticated high end products induce the belief among customers that the low end products they produce are likely to perform better because of their higher technical skill. We show that in the presence of this quality spillover effect, the standard result of monopolistic quality discrimination breaks down. It is possible that in equilibrium, customers are provided quality levels above or below the socially optimal level, irrespective of the group they belong to.
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| technical specification and performance
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| monopolistic quality discrimination
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