<scp>Fat Products</scp>

Abstract

The economics literature generally considers products as points in some characteristics space. With more products being flexible or self‐customizable to some degree, it makes sense to model products with positive measure. I develop a model of firms which can offer interval‐long “fat” products in the spatial model of differentiation. Contrary to the standard results, profits of the firms can decrease with increased differentiation in the market—there is a standard effect of lowering the incentive to cut prices, but there is also an incentive to provide more content, resulting in higher costs and possibly overall losses.