If at First You Don't Succeed…: Profits, Prices, and Market Structure in a Model of Quality with Unknowable Consumer Heterogeneity†

  1. Kala Krishna‡,
  2. Tor Winston

Article first published online: 2 JUN 2003

DOI: 10.1111/1468-2354.t01-1-00081

Issue

International Economic Review

International Economic Review

Volume 44, Issue 2, pages 573–597, May 2003

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How to Cite

Krishna, K. and Winston, T. (2003), If at First You Don't Succeed…: Profits, Prices, and Market Structure in a Model of Quality with Unknowable Consumer Heterogeneity. International Economic Review, 44: 573–597. doi: 10.1111/1468-2354.t01-1-00081

Author Information

  1. The Pennsylvania State University and NBER

Publication History

  1. Issue published online: 2 JUN 2003
  2. Article first published online: 2 JUN 2003

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Why are higher quality niches seen as intrinsically more profitable in business circles? Why do high quality products sometimes have a low real price, whereas it is unusual to see low quality products with high real prices? Can markets have quality differentiation as well as quality bunching? How does the rate at which fixed costs change with quality affect market structure? In this article we develop a new model of quality that casts light on such issues.

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