Skip to main content
SpringerLink
Log in

Model Exit in a Vertically Differentiated Market: Interfirm Competition versus Intrafirm Cannibalization in the Computer Hard Disk Drive Industry

  • Published:
Review of Industrial Organization Aims and scope Submit manuscript

Abstract

What characteristics of a product’s local market make its withdrawal more likely? This study investigates the importance of intrafirm “cannibalization” of a product’s demand by products manufactured by the same firm versus interfirm competition from others’ products. While both forces impact product withdrawal, cannibalization has a more robust and significant effect. Hedonic price regressions also reveal higher discounting of older models’ quality-adjusted prices, strengthening the argument for caution when treating list prices as proxies for transaction prices.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • S.P. Anderson A. Palma Particlede J.-F. Thisse (1992) Discrete Choice Theory of Product Differentiation The MIT Press Cambridge, MA

    Google Scholar 

  • S.P. Anderson J.K. Goerce R. Ramer (1997) ArticleTitle‘Location, Location, Location’ Journal of Economic Theory 77 IssueID1 102–127

    Google Scholar 

  • Baum, C. (1999) ‘PROBEXOG-TOBEXOG: Stata modules to test exogeneity in probit/tobit’, http://ideas.repec.org/c/boc/bocode/s401102.html.

  • E.R. Berndt Z. Griliches (1993) ‘Price Indexes for Microcomputers: An Exploratory Study’ M. F. Foss M. E. Manser A. H. Young (Eds) Price Measurements and Their Uses, NBER Studies in Income and Wealth University of Chicago Press Chicago

    Google Scholar 

  • T.F. Bresnahan (1987) ArticleTitle‘Competition and Collusion in the American Automobile Industry: The 1955 Price War’ Journal of Industrial Economics 35 IssueID4 457–482

    Google Scholar 

  • R.C. Feenstra J. A. Levinsohn (1995) ArticleTitle‘Estimating Markups and Market Conduct with Multidimensional Product Attributes’ Review of Economics and Statistics 62 IssueID1 19–52

    Google Scholar 

  • P. Ghemawat B. Nalebuff (1985) ArticleTitle‘Exit’ RAND Journal of Economics 16 IssueID2 184–194

    Google Scholar 

  • P. Ghemawat B. Nalebuff (1990) ArticleTitle‘The Devolution of Declining Industries’ Quarterly Journal of Economics 105 IssueID1 167–186

    Google Scholar 

  • S.M. Greenstein J.B. Wade (1998) ArticleTitle‘The Product Life Cycle in the Comercial Mainframe Computer Market, 1968-1982’ RAND Journal of Economics 29 IssueID4 772–789

    Google Scholar 

  • Harkness, J. (2001) ‘IVPROB-IVTOBIT: Stata modules to estimate instrumental variables probit and tobit’. http://ideas.repec.org/c/boc/bocode/s415801.html.

  • J. Lerner (1995) ArticleTitle‘Pricing and Financial Resources: An Analysis of the Disk Drive Industry, 1980–88’ The Review of Economics and Statistics 67 IssueID4 585–598

    Google Scholar 

  • W. Newey (1987) ArticleTitle‘Simultaneous Estimation of Limited Dependent Variable Models with Endogenous Explanatory Variables’ Journal of Econometrics 36 231–250 Occurrence Handle10.1016/0304-4076(87)90001-7

    Article  Google Scholar 

  • Olley, S., and C. Himmelberg (1995) ‘New Products and the Dynamics of Competition: An Empirical Study of the Hard Disk Industry’. preliminary, photocopy.

  • R. Porter (1979) The Disk/Trend Report. Mountain View Disk/Trend. Inc. CA

    Google Scholar 

  • Ruebeck, C. S. (2000) ‘Changing Markets and Changing Behavior: Three Essays’, Ph.D. Dissertation, Department of Economics, The Johns Hopkins University.

  • A. Shaked J. Sutton (1987) ArticleTitle‘Product Differentiation and Industrial Structure’ Journal of Industrial Economics 37 IssueID2 131–146

    Google Scholar 

  • A. Shaked J. Sutton (1990) ArticleTitle‘Multiproduct Firms and Market Structure’ RAND Journal of Economics 21 IssueID1 45–62

    Google Scholar 

  • R.J. Smith R.W. Blundell (1986) ArticleTitle‘An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply’ Econometrica 54 IssueID4 679–686

    Google Scholar 

  • J. Stavins (1995) ArticleTitle‘Model Entry and Exit in a Differentiated-Product Industry: The Personal Computer Market’ The Review of Economics and Statistics 67 IssueID4 571–584

    Google Scholar 

  • L.A. Thomas (1999) ArticleTitle‘Adoption Order of New Technologies in Evolving Markets’ Journal of Economic Behavior and Organization 38 IssueID4 453–482

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics and Business, Lafayette College, Easton, PA, 18042, USA

    Christopher S. Ruebeck

Authors
  1. Christopher S. Ruebeck
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Christopher S. Ruebeck.

Additional information

Classification: C25, C41, D43, L11, L13, L23, L63, O33

Rights and permissions

Reprints and permissions

About this article

Cite this article

Ruebeck, C.S. Model Exit in a Vertically Differentiated Market: Interfirm Competition versus Intrafirm Cannibalization in the Computer Hard Disk Drive Industry. Rev Ind Organ 26, 27–59 (2005). https://doi.org/10.1007/s11151-004-6576-4

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11151-004-6576-4

Keywords

Search

Navigation