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Vertical Differentiation and Entry Deterrence: A Reconsideration

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  • Usategui Díaz de Otalora, José María
  • Beloki, Lander
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    Abstract

    In this work we emphasize why market coverage should be considered endogenous for a correct analysis of entry deterrence in vertical differentiation models and discuss the implications of this endogeneity for that analysis. We consider contexts without quality costs and also contexts with convex fixed quality costs.

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    File URL: https://addi.ehu.es/bitstream/10810/6744/1/wp2005-06.pdf
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    Bibliographic Info

    Paper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 2005-06.

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    Date of creation: Jan 2005
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    Handle: RePEc:ehu:dfaeii:200506

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    Postal: Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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    Keywords: vertical differentiation; market coverage; entry deterrence; quality competition;

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    1. Lutz, Stefan, 1996. "Vertical Product Differentiation and Entry Deterrence," CEPR Discussion Papers 1455, C.E.P.R. Discussion Papers.
    2. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
    3. Hung, N. M. & Schmitt, Nicolas, 1988. "Quality competition and threat of entry in duopoly," Economics Letters, Elsevier, vol. 27(3), pages 287-292.
    4. Donnenfeld, S. & Weber, S., 1991. "Limit Qualities and Entry Deterrence," Papers 92-4, York (Canada) - Department of Economics.
    5. Crampes, C. & Hollander, A., 1992. "Duopoly and Quality Standards," Papers 92.g, Toulouse - GREMAQ.
    6. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    7. Scarpa, Carlo, 1998. "Minimum quality standards with more than two firms1," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 665-676, September.
    8. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-83, September.
    9. Peitz, Martin, 1995. "Utility maximization in models of discrete choice," Economics Letters, Elsevier, vol. 49(1), pages 91-94, July.
    10. Constantatos, Christos & Perrakis, Stylianos, 1999. "Free entry may reduce total willingness-to-pay1," Economics Letters, Elsevier, vol. 62(1), pages 105-112, January.
    11. Wauthy, Xavier, 1996. "Quality Choice in Models of Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 345-53, September.
    12. Aoki, Reiko & Prusa, Thomas J., 1997. "Sequential versus simultaneous choice with endogenous quality," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 103-121, February.
    13. Donnenfeld, Shabtai & Weber, Shlomo, 1992. "Vertical product differentiation with entry," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 449-472, September.
    14. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    15. Constantatos, Christos & Perrakis, Stylianos, 1997. "Vertical differentiation: Entry and market coverage with multiproduct firms," International Journal of Industrial Organization, Elsevier, vol. 16(1), pages 81-103, November.
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