Nonlinear Pricing and Multimarket Duopolists
AbstractThis paper studies competition in price-quality menus within the context of a horizontally differentiated duopoly, where each firm also operates in a local, monopolistic market. It is assumed that the consumer's unobservable valuation for quality is determined by the nature of his preferences over brand product characteristics. I show that if competition between the two firms is sufficiently fierce, the equilibrium contract features overprovision of quality for sufficiently low types. Thus, with respect to the monopoly setting, competition may introduce new types of distortions, namely upward distortions. This suggests that the relationship between 'toughness of competition' and welfare may not necessarily be monotonic.
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Bibliographic InfoPaper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 04/110.
Length: 31 pages
Date of creation: Oct 2004
Date of revision:
oligopoly; other forms of market imperfection;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-21 (All new papers)
- NEP-COM-2004-10-21 (Industrial Competition)
- NEP-FIN-2004-10-21 (Finance)
- NEP-IND-2004-10-21 (Industrial Organization)
- NEP-MIC-2004-10-21 (Microeconomics)
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