Scandinavian Working Papers in Business Administration
Working Papers,
Copenhagen Business School, Department of International Economics and Management
No 9-1999: From Closed to Contestable Markets: Product Differentiation in Indian Durable Consumer Goods Industry
Amal Sanyal and Murali Patibandla
Additional contact information
Amal Sanyal: Lincoln University, Postal: Commerce Division, PO Box 84, Lincoln University, New Zealand
Murali Patibandla: Department of International Economics and Management, Copenhagen Business School, Postal: Department of International Economics and Management, Copenhagen Business School, Howitzvej 60, 2nd floor , DK-2200 Copenhagen N, Denmark
Abstract: We examine the most likely strategy of product differentiation by newly entering multinational firms when market reforms begin in a developing economy. We argue that incumbents in a non contestable protected market do not have the usual advantages of an incumbent as in a standard sequential entry model of contestable markets. In this context we use a model of vertical product differentiation to argue that a new entrant will choose a higher quality product and a higher price given the income distribution profile brought in by the market reforms. We test the propositions empirically on the basis of firm level panel data for five Indian durable consumer goods industries.
Keywords: product differentation; multinational firms; protected markets; market entry; India
20 pages, May 30, 1999
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