Book contents
- Frontmatter
- Contents
- Preface
- PART ONE INTRODUCTION
- PART TWO PREFERENCE, CONSUMPTION, AND DEMAND
- PART THREE THE FIRM AND THE INDUSTRY
- 6 The Business Firm
- 7 Equilibrium in the Product Market – Competitive Industry
- 8 Monopolies, Cartels, and Networks
- 9 Product Quality and Product Variety
- 10 Competition Among the Few: Oligopoly and Strategic Behavior
- 11 Dealing with Uncertainty – The Economics of Risk and Information
- PART FOUR FACTOR MARKETS AND INCOME DISTRIBUTION
- PART FIVE EXCHANGE
- PART SIX ECONOMICS AND TIME
- PART SEVEN POLITICAL ECONOMY
- Answers to Selected Questions
- Name Index
- Subject Index
9 - Product Quality and Product Variety
from PART THREE - THE FIRM AND THE INDUSTRY
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- Preface
- PART ONE INTRODUCTION
- PART TWO PREFERENCE, CONSUMPTION, AND DEMAND
- PART THREE THE FIRM AND THE INDUSTRY
- 6 The Business Firm
- 7 Equilibrium in the Product Market – Competitive Industry
- 8 Monopolies, Cartels, and Networks
- 9 Product Quality and Product Variety
- 10 Competition Among the Few: Oligopoly and Strategic Behavior
- 11 Dealing with Uncertainty – The Economics of Risk and Information
- PART FOUR FACTOR MARKETS AND INCOME DISTRIBUTION
- PART FIVE EXCHANGE
- PART SIX ECONOMICS AND TIME
- PART SEVEN POLITICAL ECONOMY
- Answers to Selected Questions
- Name Index
- Subject Index
Summary
The text so far has focused on how prices and quantities are determined in markets. But firms also can get to choose the nature of the products they offer to consumers. Television networks can air comedies or dramas or news programs, farmers can grow different strains of wheat, barbers can cut hair in different styles, automobile manufacturers can offer sedans or sports utility vehicles.
Firms have two main dimensions of choice in determining the nature of the product: what level of quality to offer, and how much variety. Quality, to be taken up in the first section of the chapter, is something that all consumers want and agree on. Durability, reliability, and safety are always desirable. In contrast, variety, the topic of the second section of the chapter, is a matter of taste. Some people like red roses, some pink, some white; some prefer conservative clothing, others want flash and novelty.
QUALITY
Products vary in many quality dimensions. For simplicity, suppose all consumers are seeking some single service feature from a product. For light bulbs it might be lumens of light output, for hard disks it might be gigabyte capacity, for gasoline it might be mileage.
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- Chapter
- Information
- Price Theory and ApplicationsDecisions, Markets, and Information, pp. 257 - 278Publisher: Cambridge University PressPrint publication year: 2005