Advanced Search
MyIDEAS: Login

Quality Competition and Social Welfare in Markets with Partial Coverage: New Results

Contents:

Author Info

  • Gregory S. Amacher
  • Erkki Koskela
  • Markku Ollikainen
Registered author(s):

    Abstract

    We use a vertical product differentiation model under partial market coverage to study the social welfare optimum and duopoly equilibrium when convex costs of quality provision are either fixed or variable in terms of production. We show the following new results. First, under fixed costs, the social planner charges a uniform price for the single variant that just covers costs of quality provision. Like the duopoly equilibrium, this socially optimal pricing entails a partially uncovered market, but a smaller share of the market is served compared with the duopoly equilibrium. Second, for the variable cost case, it is socially optimal to provide both high- and low-quality variants, but market shares need not be equal. This differs from the result in fully covered markets. Third, in the duopoly equilibrium, the quality spread is too wide under variable costs relative to the social optimum. Under fixed costs, the duopoly produces two variants, but quality is too low relative to the social optimum, which has only one variant. Copyright Blackwell Publishers Ltd and the Board of Trustees of the Bulletin of Economic Research, 2005.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=boer&volume=57&issue=4&year=2005&part=null
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Bulletin of Economic Research.

    Volume (Year): 57 (2005)
    Issue (Month): 4 (October)
    Pages: 391-405

    as in new window
    Handle: RePEc:bla:buecrs:v:57:y:2005:i:4:p:391-405

    Contact details of provider:
    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0307-3378

    Order Information:
    Web: http://www.blackwellpublishing.com/subs.asp?ref=0307-3378

    Related research

    Keywords:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bla:buecrs:v:57:y:2005:i:4:p:391-405. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.