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We conduct a laboratory experiment that tests two fundamental predictions unique to salience theory. If an agent … purchases one of two vertically differentiated products, salience theory makes the following two distinct predictions. First, it … strongly support both predictions of salience theory. …
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We analyze two- and three-dimensional variants of Hotelling's model of differentiated products. In our setup, consumers can place different importance on each product attribute; this is measured by a weight in the disutility of distance in each dimension. Two firms play a two-stage game; they...
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