search query: @author Dana, J.D. Jr. / total: 2
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| Author: | Carlton, D.W. Dana, J.D. Jr. |
| Title: | Product variety and demand uncertainty: why markups vary with quality |
| Journal: | Journal of Industrial Economics
2008 : SEP, VOL. 56:3, p. 535-552 |
| Index terms: | products product variety demand uncertainty quality models |
| Language: | eng |
| Abstract: | Demand uncertainty is shown to be able to explain equilibrium product variety in the presence of sunk costs. Product variety is an efficient response to uncertainty because it reduces the expected costs associated with excess capacity. It is found herein that within the firm's product line, the highest quality product has the highest profit margin but the lowest percentage margin, whereas lowest quality product has the highest percentage margin but the lowest absolute margin. Both of these relationships are consistent with evidence of the marketing studies. |
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