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Niche-Product Offering in the Spokes Model

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We use a spokes model to analyze firms' incentives when facing the choices of general-purpose products and niche products. Products at or near the end of the spokes are niche products, while products near the origin are more standardized products that cater to the taste of many consumers. Our results indicate that although a monopolist always offers the general-purpose product, if a firm anticipates entry, it may choose to stake claim to a niche market. For low transportation costs or when consumers do not have strong brand preferences, the early entrant chooses the general-purpose product. But this equilibrium is characterized by aggressive pricing behavior.
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Keywords: ENTRY; PRODUCT CUSTOMIZATION; PRODUCT DIFFERENTIATION; SPATIAL OLIGOPOLY

Document Type: Research Article

Publication date: 01 June 2018

This article was made available online on 28 July 2017 as a Fast Track article with title: "Niche-Product Offering in the Spokes Model".

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  • Founded as Zeitschrift für die gesamte Staatswissenschaft in 1844.

    As one of the oldest journals in the field of political economy, the Journal of Institutional and Theoretical Economics (JITE) deals traditionally with the problems of economics, social policy, and their legal framework. JITE is listed in the Journal of Economic Literature, the Social Science Citation Index, the International Bibliography of the Social Sciences, and COREJ.

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    From 2013 on all accepted articles are published in an Online First version (in their final layout) to make them searchable and citable by their DOI immediately after peer review and acceptance. Once the article is published in an issue of the journal, the Online First version will be removed.

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