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Price competition in the presence of rapid innovation and imitation: the case of digital cameras

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High-tech rivalry typically involves sellers introducing a sequence of models each offering greater capacity/functionality. Given heterogeneous consumers this both creates and erodes any quality/novelty premium as innovation segments the market and imitation then populates the segments so created. We present a hedonic price analysis using a unique US digital camera database. This confirms the intensity of the quality-adjusted price fall and the dominance of vertical differentiation and identifies a premium for frontier models.

Keywords: hedonic pricing; imitative entry; innovative entry

Document Type: Research Article


Affiliations: The Business School, University of Nottingham, Nottingham, UK

Publication date: 2009-01-01

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