Working Papers
Product Design in an Hedonically Differentiated Duopoly (SSRN, Latest Version, Submitted)
Abstract: Using a simplified version of the hedonic linear demand model of Pellegrino (2025), we study product design in an abstract two-dimensional 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 find a unique subgame perfect Nash equilibrium characterized by a common high quality product. A simple welfare analysis reveals that this equilibrium, compared to two possible optimal solutions, almost always is sub-optimal. This inefficiency is shown to depend on the assumption of an imperfectly competitive market mechanism. Thus, even if in some cases firms may select the optimal product design, if they detain some degree of market power, the resulting equilibrium will still be inefficient.
Presentations: CISS 2025 (Forthcoming), 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