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Research " COMPETITIVE RESPONSE TO RADICAL PRODUCT INNOVATIONS "

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COMPETITIVE RESPONSE TO RADICAL PRODUCT INNOVATIONS The competitive case serves as a baseline, but it is not a realistic description of choice in the presence of peer group externalities. I next consider a market with ten equally-sized districts, a degree of Tiebout choice that, as is discussed below in Section 1.4, corresponds roughly to the 80th percentile U.S. metropolitan area. Assume that J = 10 , n = N 10 , and 10 j μ j = , j = 1,K,10 . Panel C of Figure 1.1 displays the unique, perfectly sorted equilibrium when δ = 0 . Families in the j th decile of the income.

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