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The option of joint purchase in vertically differentiated markets

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  • GABSZEWICZ, Jean J.
  • WAUTHY, Xavier Y.

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://dx.doi.org/10.1007/s00199-003-0359-2
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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 RP with number -1667.

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Handle: RePEc:cor:louvrp:-1667

Note: In : Economic Theory, 22, 817-829, 2003
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  1. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  2. repec:fth:louvco:0062 is not listed on IDEAS
  3. Jean Gabszewicz & Nathalie Sonnac & Xavier Wauthy, 2000. "On Price Competition with Complementary Goods," Working Papers 2000-24, Centre de Recherche en Economie et Statistique.
  4. 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).
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Cited by:
  1. Simon P. Anderson & Oystein Foros & Hans Jarle Kind & Martin Peitz, 2011. "Media Market Concentration, Advertising Levels, and Ad Prices," CESifo Working Paper Series 3677, CESifo Group Munich.
  2. Calzada, Joan & Valletti, Tommaso, 2011. "Intertemporal movie distribution: Versioning when customers can buy both versions," CEPR Discussion Papers 8279, C.E.P.R. Discussion Papers.
  3. 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.
  4. 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..
  5. Anderson, Simon P & Foros, Øystein & Kind, Hans Jarle, 2012. "Product quality, competition, and multi-purchasing," CEPR Discussion Papers 8923, C.E.P.R. Discussion Papers.
  6. Minniti, Antonio & Vergari, Cecilia, 2010. "Turning Piracy into Profits: a Theoretical Investigation," Information Economics and Policy, Elsevier, vol. 22(4), pages 379-390, December.
  7. 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).

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