posted on 2023-06-09, 03:58authored byAnthony Heyes, Steven Martin
A fuzzy product (FP) has characteristics specified only imprecisely at time of sale. Building fuzziness into its product gives a firm flexibility to exploit favorable supply opportunities that arise between sale and delivery, and so reduce expected costs. While increased competition reduces price, the effect on fuzziness is ambiguous. Socially optimal fuzziness is characterized. Firms provide goods that are too fuzzy compared to first best, though entry serves to correct this inefficiency for certain types of goods. Considering competition with a niche good, a FP sells for a lower price, although it captures a larger market share and is more profitable.