On production costs in vertical differentiation models
AbstractIn this paper, we analyse the effects of the introduction of a unit production cost beside a fixed cost of quality improvement in a duopoly model of vertical product differentiation. Thanks to an original methodology, we show that a low unit cost tends to reduce product differentiation and thus prices, whereas a high unit cost leads to widen product differentiation and to increase prices
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Date of creation: 2009
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- Brécard, Dorothée, 2010. "On production costs in vertical differentiation models," Economics Letters, Elsevier, vol. 109(3), pages 183-186, December.
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