| Popis: |
This paper seeks to explain two related phenomena: (i) it is often the case that when the newvariety of a product is launched, some consumers do not purchase the latest variety and (ii)the quality of the latest variety of a product is often not significantly superior compared to the existing variety. We consider a simple model of monopoly with two types of consumers:“regular” (typeR) who cares only about the absolute quality of the product and “fastidious”(typeF) who cares about therelativequality vis-a-vis the existing variety. We show thatit is never optimal for the monopolist to exclusively serve typeF. Moreover, we identifysituations where although it is optimal for the monopolist to upgrade the quality of theproduct, this upgrade is not sufficient to meet the standards of typeF.As a result, only typeR buys the upgraded variety while typeF chooses not to buy it. |
