Multi-product strategies and relative preferences for quality
AbstractIn this paper we investigate whether a monopoly in a vertically differentiated market may have the incentive to adopt a multi-product strategy if the consumers are concerned by the other consumers' choices. We use a variant of the Mussa and Rosen model where the utility of a consumer is positively or negatively affected by her relative standing i.e how high or low is the quality she chooses with respect to the other consumers'' choices. We prove that a multi-product strategy may be adopted by the monopoly if the consumers'' social distinction desire is strong enough.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 4 (2008)
Issue (Month): 34 ()
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Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262200716, December.
- Acharyya, Rajat, 2005. "Quality discrimination among income constrained consumers," Economics Letters, Elsevier, Elsevier, vol. 86(2), pages 245-251, February.
- GABSZEWICZ, Jean J., .
"Blue and red cars, or blue cars only? A note on product variety,"
CORE Discussion Papers RP, UniversitÃ© catholique de Louvain, Center for Operations Research and Econometrics (CORE)
-524, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Gabszewicz, Jean Jaskold, 1983. "Blue and Red Cars, or Blue Cars Only? A Note on Product Variety," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 50(198), pages 203-06, May.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, Elsevier, vol. 18(2), pages 301-317, August.
- Acharyya, Rajat, 1998. "Monopoly and product quality: Separating or pooling menu?," Economics Letters, Elsevier, Elsevier, vol. 61(2), pages 187-194, November.
- A. Mantovani & C. Vergari, 2013. "Hedonic vs Environmental Quality: Which Policy Can Help in Lowering Pollution Emissions?," Working Papers wp906, Dipartimento Scienze Economiche, Universita' di Bologna.
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