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The option of joint purchase in vertically differentiated markets

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  • Gabszewicz, Jean

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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Bibliographic Info

Paper provided by Université catholique de Louvain in its series Open Access publications from Université catholique de Louvain with number info:hdl:2078.1/23408.

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Date of creation: 2003
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Publication status: Published in Economic Theory (2003) v.22, p.817-829
Handle: RePEc:ner:louvai:info:hdl:2078.1/23408

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Web page: http://www.uclouvain.be

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  1. Gabszewicz, Jean & Sonnac, Nathalie & Wauthy, Xavier, 2001. "On price competition with complementary goods," Economics Letters, Elsevier, vol. 70(3), pages 431-437, March.
  2. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  3. 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).
  4. repec:fth:louvco:0062 is not listed on IDEAS
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Cited by:
  1. 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.
  2. 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.
  3. Minniti, Antonio & Vergari, Cecilia, 2010. "Turning Piracy into Profits: a Theoretical Investigation," Information Economics and Policy, Elsevier, vol. 22(4), pages 379-390, December.
  4. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle & Peitz, Martin, 2011. "Media market concentration, advertising levels, and ad prices," Discussion Paper Series in Economics 24/2011, Department of Economics, Norwegian School of Economics.
  5. 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.
  6. 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..
  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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