Income distribution, quality differentiation and product line design

Abstract

The purpose of this paper is to characterize the relationship between quality differentiation, income distribution and product line design. According to the findings, the author can explain the trend of quality differentiation and the phenomenon of extreme product diversity in different conditions of income distribution. When the middle class of consumers reach a certain critical few number, the quality for them will descend. Only the high-end and low-end quality left for this extreme condition; that is, the product quality spectrum will shrink. The product quality for middle and low class will gradually get worse and worse, even lower than original quality. The product line design will be reconsidered to the opposite extremes.