From well-heeled to tip-toed, shoe-shine to shoe-lace: monopolistic competition and product differentiation in men’s footwear

Abstract

For many decades, the only branded footwear Indians knew was Bata. After years of economic liberalization; however, one finds many local, national, and international firms jostling for customer attention by producing various types of branded footwear. In fact, India has now emerged as the second largest producer of footwear in the world. The Indian footwear market can be described today as a stylized case of a monopolistically competitive market. In this study, we focus our attention on men’s formal shoes which are differentiated by variations in many attributes such as heel, toes, colour, surface, laces, buckles and brands. Invoking hedonic price analysis and bid and offer curves of the customers and firms respectively, shoe prices are viewed as the sum total of the valuation of each of these attributes. The relative valuation is estimated by regressing market prices of shoes on its binary variable attributes. Analysis shows that shoes made of leather, shiny surface, buckles, laces, and brands carry a premium; and, differentiation based on colour, pointed toes, high heels, and texture is not important. In a highly competitive market, such data driven studies can provide pointers to firms in altering existing shoe models and successfully launching newer ones.