Working Papers
Product Design in an Hedonically Differentiated Duopoly, The BE Journal of Theoretical Economics (Forthcoming)
Abstract: Using a reduced version of the generalized hedonic linear (GHL) model developed by Pellegrino(2025), we study the strategic design of products in a multidimensional characteristics space. In particular, we construct a simple two stage duopoly game in which firms first choose the design of their product and then set their output. We show that at the unique subgame perfect Nash equilibrium both firms choose the unique product design perfectly aligned with the consumer’s ideal bundle of characteristics. We characterize how this outcome emerges through an adjustment dynamics in which product design becomes the key strategic instrument for gaining a competitive advantage in the quantity subgame. We refer to this process as the undercutting mechanism.
Presentations: The Lisbon Meetings in Game Theory and Applications 2026, CISS 2025, EARIE 2025, CEPET 2025, OLIGO Workshop 2025, 2nd Milan PhD Workshop 2024, XXXVIII Jornadas de Economia Industrial 2024, Bocconi University.
Work in Progress
Choice of the Product Space in Presence of Heterogeneous Consumers, mimeo
Innovation and Trade Competitiveness: Evidence From Advanced and Emerging Economies, mimeo (with T. Buccellato and G. Santoni)
Monopolized Product Innovation: Incentives and Consumer Surplus, mimeo