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1. 

   Bob B

   February 15, 2007

   There’s a daunting professional literature on this under the (? misleading) rubric of “industrial organization”. Caution is advised – perhaps the more prudent approach is via standard texts by such authors as Luis Cabral, Stephen Martin, Church + Ware. Unfortunately, access to the seminal texts is restricted to subscribers to academic institutions although this quick survey on the web shows the challenging treats in store:
   http://www.ne.su.se/education/graduate/05_06/io/notes/L3.pdf
   The title of one seminal paper by Shaked and Sutton yields an important insight for vertically differentiated markets (meaning markets where buyers would generally agree on the quality ranking of products were all to be on sale at the same price): Relaxing Price Competition Through Product Differentiation (R Econ Studies 1982).
   The literature is mostly mathematical and games theoretic even if the issues are familiar enough to consumers but perplexing – why does Coca Cola continue to dominate the world market for carbonated cola drinks when the technology is basically simple and easy to emulate? Does the answer to that connect with hypotheses of why Microsoft Windows has a (reported) 90% share of the global market for the operating systems of personal computers?

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