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Multi-product strategies and relative preferences for quality

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  • Hend GHAZZAI

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    (Qatar University)

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    Abstract

    In 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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    File URL: http://www.accessecon.com/pubs/EB/2008/Volume4/EB-08D40042A.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 4 (2008)
    Issue (Month): 34 ()
    Pages: 1-10

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    Handle: RePEc:ebl:ecbull:eb-08d40042

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    2. Acharyya, Rajat, 1998. "Monopoly and product quality: Separating or pooling menu?," Economics Letters, Elsevier, vol. 61(2), pages 187-194, November.
    3. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    4. Acharyya, Rajat, 2005. "Quality discrimination among income constrained consumers," Economics Letters, Elsevier, vol. 86(2), pages 245-251, February.
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    Cited by:
    1. 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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