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The option of joint purchase in vertically differentiated markets

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  • Jean J. Gabszewicz
  • Xavier Y. Wauthy

Abstract

Within the framework proposed by Mussa and Rosen (1978) for modelling quality differentiation, we allow consumers to buy simultaneously different variants of the same indivisible good. We call this the "joint purchase option". We show that this option dramatically affects price competition: while a unique equilibrium always prevails when consumers are assumed to make mutually exclusive purchases, either uniqueness, or multiplicity, or absence of price equilibrium arise when the joint purchase option is opened depending on the utility attached to joint purchase relative to separate purchases.

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File URL: http://hdl.handle.net/10.1007/s00199-003-0359-2
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 22 (2003)
Issue (Month): 4 (November)
Pages: 817-829

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Handle: RePEc:spr:joecth:v:22:y:2003:i:4:p:817-829

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Related research

Keywords: Keywords and Phrases: Joint purchase; Price; Vertical differentiation.; JEL Classification Numbers: L13.;

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References

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  1. GABSZEWICZ, Jean & WAUTHY, Xavier, 2000. "Another perverse effect of monopoly power," CORE Discussion Papers 2000062, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. repec:fth:louvco:0062 is not listed on IDEAS
  3. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  4. GABZEWICZ, Jean & SONNAC, Nathalie & WAUTHY, Xavier, . "On price competition with complementary goods," CORE Discussion Papers RP -1505, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Cited by:
  1. Minniti, Antonio & Vergari, Cecilia, 2010. "Turning Piracy into Profits: a Theoretical Investigation," Information Economics and Policy, Elsevier, vol. 22(4), pages 379-390, December.
  2. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle & Peitz, Martin, 2011. "Media market concentration, advertising levels, and ad prices," Discussion Paper Series in Economics 24/2011, Department of Economics, Norwegian School of Economics.
  3. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle, 2012. "Product quality, competition, and multi-purchasing," Discussion Papers 2012/9, Department of Business and Management Science, Norwegian School of Economics.
  4. Hélène LATZER & Florian MAYNERIS, 2012. "Income distribution and vertical comparative advantage Theory and evidence," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2012018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 20 Oct 2012.
  5. Joan Calzada & Tommaso M. Valletti, 2012. "Intertemporal Movie Distribution: Versioning When Customers Can Buy Both Versions," Marketing Science, INFORMS, vol. 31(4), pages 649-667, July.
  6. GABSZEWICZ, Jean & WAUTHY, Xavier, 2004. "Two-sided markets and price competition with multi-homing," CORE Discussion Papers 2004030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Francisco Martinez, 2007. "Versioning Goods and Joint Purchase: Substitution and Complementarity Strategies," ThE Papers 07/06, Department of Economic Theory and Economic History of the University of Granada..

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