How brand loyalty affects product differentiation

Author ORCID Identifier

John HarterORCID iD iconhttps://orcid.org/0000-0001-7500-6712

Department

Business

Document Type

Article

Publication Date

1-1-2004

Abstract

This paper examines the effects of brand loyalty on the amount of product differentiation. It presents three different methods of modeling brand loyalty in a spatial framework. Brand loyalty might be caused by switching costs, either constant or a function of how similar the product variety is to the consumer's most-preferred variety. These methods of modeling yield some (but not maximum) differentiation among the products in a duopoly. If the assumption of constant preferences is relaxed, the standard minimum differentiation result holds, and brand loyalty has no impact on varieties.

Journal Title

Journal of Applied Economics and Policy

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