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Price equilibrium and willingness to pay in a vertically differentiated mixed duopoly

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  • Benassi, Corrado
  • Castellani, Massimiliano
  • Mussoni, Maurizio

Abstract

In the framework of a vertically differentiated mixed duopoly, with uncovered market and zero costs, we study the existence of a price equilibrium when a welfare-maximizing public firm producing low quality goods competes against a profit-maximizing private firm producing high quality goods. We show that a price equilibrium exists if the quality spectrum is wide enough vis à vis a measure of the convexity of the distribution of the consumers’ willingness to pay, and that such equilibrium is unique if this sufficient condition is tightened. Logconcavity of the income distribution is inconsistent with the existence of equilibrium.

Suggested Citation

  • Benassi, Corrado & Castellani, Massimiliano & Mussoni, Maurizio, 2016. "Price equilibrium and willingness to pay in a vertically differentiated mixed duopoly," Journal of Economic Behavior & Organization, Elsevier, vol. 125(C), pages 86-96.
  • Handle: RePEc:eee:jeborg:v:125:y:2016:i:c:p:86-96
    DOI: 10.1016/j.jebo.2016.01.011
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    7. Xingtang Wang & Leonard F. S. Wang, 2022. "Indirect taxation, quality choice, and social welfare," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1764-1772, September.
    8. Del Rey Elena & Estevan Fernanda, 2020. "Assessing Higher Education Policy in Brazil: A Mixed Oligopoly Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-16, January.

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    More about this item

    Keywords

    Price equilibrium; Vertical differentiation; Mixed duopoly;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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