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Product Variety and the Inefficiency of Monopoly

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  • Donnenfeld, Shabtai
  • White, Lawrence J

Abstract

In this note, the authors extend earlier work that examined the distortions in product quality created by a monopolist selling to consumers with different and unobservable tastes. When consumers have differing absolute and marginal willingness to pay for quality, they demonstrate that the monopolist may find it profitable to distort quality either at the low end or at the high end of a quality array. This latter result has not previously been demonstrated. The authors also provide intuitive comparative statics and discuss policy implications. Copyright 1988 by The London School of Economics and Political Science.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 55 (1988)
Issue (Month): 219 (August)
Pages: 393-401

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Handle: RePEc:bla:econom:v:55:y:1988:i:219:p:393-401

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Cited by:
  1. L. Lambertini, 1998. "Does Monopoly Undersupply Product Quality?," Working Papers 317, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. Sibly, Hugh, 2008. "Quality Versus Quantity in Vertically Differentiated Products Under Non-Linear Pricing," Working Papers 7335, University of Tasmania, School of Economics and Finance, revised 01 Jun 2008.
  3. Yasuji Otsuka & Bradley Braun, 2003. "Price Cap Regulation in the Cable Television Industry: Why was the Demand Stagnant?," Journal of Industry, Competition and Trade, Springer, vol. 3(1), pages 41-55, March.
  4. Fischer, Carolyn, 2005. "On the importance of the supply side in demand-side management," Energy Economics, Elsevier, vol. 27(1), pages 165-180, January.
  5. Rasha Ahmed & Kathleen Segerson, 2006. "Collective Voluntary Agreements and the Production of Less Polluting Products," Working papers 2006-18, University of Connecticut, Department of Economics, revised May 2007.
  6. Plourde, Charles & Bardis, Vassilios, 1999. "Fuel economy standards in a model of automobile quality," Energy Economics, Elsevier, vol. 21(4), pages 309-319, August.
  7. Sibly, Hugh, 2008. "Vertical Product Differentiation with Linear Pricing," Working Papers 7335, University of Tasmania, School of Economics and Finance, revised 01 Jul 2008.
  8. Madhu Khanna & George Deltas & Donna Harrington, 2009. "Adoption of Pollution Prevention Techniques: The Role of Management Systems and Regulatory Pressures," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 44(1), pages 85-106, September.
  9. Tian Xia & Richard Sexton, 2010. "Brand or Variety Choices and Periodic Sales as Substitute Instruments for Monopoly Price Discrimination," Review of Industrial Organization, Springer, vol. 36(4), pages 333-349, June.
  10. Fischer, Carolyn, 2004. "Who Pays for Energy Efficiency Standards?," Discussion Papers dp-04-11, Resources For the Future.

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