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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Article provided by Economics Bulletin in its journal Economics Bulletin.
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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