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Uncertainty quality, product variety and price competition

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  • GABSZEWICZ, Jean J.

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

  • RESENDE, Joana

Abstract

This paper analyses price competition under product differentiation when goods are defined in a two dimensional characteristic space, and consumers do not know which firm sells which quality. Equilibrium prices consist of two additive terms, which balance consumers' relative valuation of goods' expected quality and consumers' preferences for variety. However the relative importance of these terms differ under vertical and horizontal dominance.

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File URL: http://www.uclouvain.be/cps/ucl/doc/core/documents/coredp2008_36.pdf
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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2008036.

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Date of creation: 01 Jun 2008
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Handle: RePEc:cor:louvco:2008036

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Keywords: product differentiation; variety; quality; uncertainty;

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