This article develops a model of industrial structure and product variety when tastes are diffuse and when a firm must incur a fixed cost and design a product before producing. Pricing and output decisions occur subsequently. While standard Cournot-Nash and Bertrand-Nash equilibrium concepts typically fail to identify a unique equilibrium among a given set of Producers, consistent conjectures determine a unique equilibrium. One aspect of this equilibrium is that consumers typically benefit from having majority tastes.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics