Price and Quality Competition
AbstractThis study considers an oligopoly model with simultaneous price and quality choice. Ex-ante homogeneous sellers compete by offering products at one of two quality levels. The consumers have heterogeneous tastes for quality: for some consumers it is efficient to buy a high quality product, while for others it is efficient to buy a low quality product. In the symmetric equilibrium firms use mixed strategies that randomize both price and quality, and obtain strictly positive profits. This framework highlights trade-offs which determine the impact of consumer protection policy in the form of quality standards.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21647.
Date of creation: 01 Aug 2009
Date of revision: 01 Feb 2010
Oligopoly; Price and quality competition; Quality standards;
Other versions of this item:
- L5 - Industrial Organization - - Regulation and Industrial Policy
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-04 (All new papers)
- NEP-COM-2010-04-04 (Industrial Competition)
- NEP-IND-2010-04-04 (Industrial Organization)
- NEP-MKT-2010-04-04 (Marketing)
- NEP-TID-2010-04-04 (Technology & Industrial Dynamics)
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