Abstract
In this chapter, I review the theoretical basis for the economic analysis of variety. The goal of this chapter is twofold: I want to position critically my work and developed few useful concepts. In particular, I will describe two approaches to the issue of variety and point out their different conclusions on the nature of variety generation and its limits.
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Notes
- 1.
Consumers perceived the car as an strange horseless carriage for rich people. Therefore, competition was based upon comfort as in the most luxuries market segment of carriage industry. On the contrary, Ford offered a new concept of the product (Clark 1985).
- 2.
For instance the PLC is the underlying concept of the Boston Consulting Group (BCG) Matrix. Stern and Stalk (1998) contains the original contribution by Bruce Henderson on the BCG matrix.
- 3.
Marshallian framework refers to market economies in which every relevant good is traded in a market at publicly know prices and all agents act as price takers (Mas-Colell et al. 1995, p. 307).
- 4.
Quasi-concavity in the utility functions implies that a preference relation on a consumption set is convex. That means that, if the commodity bundle x is indifferent to y, any linear combination of x and y, cannot be worse than either one or the other alone, i.e. a mixture (more variety) is almost preferred. A classic reference is Mas-Colell et al. (1995), Chap. 3. In this body of literature, the most popular contributions are Dixit and Stiglitz (1977), Hart(1985) and Perloff and Salop (1985).
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Guerzoni, M. (2014). The Economics of Variety. In: Product Variety in Automotive Industry. SpringerBriefs in Business. Springer, Cham. https://doi.org/10.1007/978-3-319-01907-9_2
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DOI: https://doi.org/10.1007/978-3-319-01907-9_2
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