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Vertical differentiation and labor market: the differentiation principle revisited

Author

Listed:
  • Amal Hili

    (ISG-Sousse, Unité MASE-ESSAI and EPEE-Evry)

  • Rim Lahmandi-Ayed

    (ESSAI-Université de Carthage and Unité MASE-ESSAI)

  • Hejer Lasram

    (IHEC-Université de Carthage, Unité MASE-ESSAI, Aix-Marseille University (AMSE) CNRS & EHESS)

Abstract

The labor market is introduced into the standard vertical differentiation model, linking increasingly the quality of the product and the effort necessary for workers to produce it. Surprisingly, when two firms compete on the product market but are monopolies on the labor market, at equilibrium they choose not to differentiate their products, which is different from the result obtained with standard vertical differentiation models.

Suggested Citation

  • Amal Hili & Rim Lahmandi-Ayed & Hejer Lasram, 2015. "Vertical differentiation and labor market: the differentiation principle revisited," Economics Bulletin, AccessEcon, vol. 35(1), pages 633-640.
    • Handle: RePEc:ebl:ecbull:eb-14-00749
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    References listed on IDEAS

    as
    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    2. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    3. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-131, June.
    4. Choi, Chong Ju & Shin, Hyun Song, 1992. "A Comment on a Model of Vertical Product Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 229-231, June.
    5. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(1), pages 3-13.
    6. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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    Citations

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    Cited by:

    1. Hend Ghazzai & Wided Hemissi & Rim Lahmandi-Ayed & Sana Kefi, 2020. "A Note on Democracy and Competition: The Role of Ownership Structure in a General Equilibrium Model with Vertical Preferences," Working Papers hal-02480175, HAL.
    2. Amani Kahloul & Rim Lahmandi-Ayed & Hejer Lasram & Didier Laussel, 2017. "Democracy and competition: Vertical differentiation and labor in a general equilibrium model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(4), pages 860-874, August.
    3. Hend Ghazzai & Wided Hemissi & Rim Lahmandi-Ayed & Sana Mami Kefi, 2021. "Note on Democracy and Competition: The Role of Ownership Structure in a General Equilibrium Model with Vertical Preferences," Revue d'économie politique, Dalloz, vol. 131(2), pages 249-261.
    4. Rabah Amir & Hend Ghazzai & Rim Lahmandi-Ayed, 2020. "On the Political Economy of Free Trade," Working Papers hal-02506064, HAL.

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    More about this item

    Keywords

    Vertical differentiation; competition; product market; labor market.;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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