The Mainstream Niche

Jul 2013 | 670

Authors: Renaud Foucart

Consumption in the time of Internet is characterized by extremely low search costs, leading to increased product diversity (the long tail) and large mainstream products (superstars).  In this paper, I show how the mainstream taste can be catered by a niche product, while minority tastes can be mainstream.  A competitive market with arbitrarily small search costs supplies a product design corresponding to the mainstream taste at a price that only mainstream buyers are willing to pay.  Products corresponding to the taste of the minority are offered at lower price, and bought by several types of buyers.

JEL Codes: C7, D8, L11

Keywords: Search, matching, horizontal product diversity

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