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Communication Dans Un Congrès Année : 2024

Introducing a Quality Variable in the Theory of Product Differentiation: Abbott (1953) and Dorfman and Steiner (1954).

Résumé

This paper examines two articles that have proposed a definition of the “quality variable” which is still used in the contemporary theory of product differentiation. The first article, written by Lawrence Abbott in 1953, provides a general discussion concerning the role of quality competition on the market. Abbott then proposes a model, presented diagrammatically to the readers, and restricted to the very specific situation in which quality is unanimously appreciated by consumers, entails a higher unit cost for firms, is unidimensional and continuous. The second article, published the following year, was written by Robert Dorfman and Peter Otto Steiner. Dorfman and Steiner propose a model in which they algebraically translate Abbott’s model. In doing so, they introduce a “quality variable” in the firm’s profit function. As they translate Abbott’s model, the quality variable is defined to describe to the very specific situation examined by Abbott. Since Dorfman and Steiner’s article has gained an important popularity in the theory of product differentiation, their definition of the quality variable became the standard way to define this variable in this theory. Therefore, we trace the origins of the assumptions commonly associated with the quality variable in the theory of product differentiation.
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hal-04537711 , version 1 (08-04-2024)

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  • HAL Id : hal-04537711 , version 1

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Julien Gradoz. Introducing a Quality Variable in the Theory of Product Differentiation: Abbott (1953) and Dorfman and Steiner (1954).. 27th Annual ESHET (European Society for the History of Economic Thought) Conference, May 2024, Graz, Autriche. ⟨hal-04537711⟩

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