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Duopoly in a Model with Vertically and Horizontally Differentiated Products

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  • Steffen Ziss

Abstract

This paper examines equilibrium in a market consisting of two sellers, each of whom produce one product which is horizontally (locationally) and vertically (qualitatively) differentiated, and many buyers. The sellers behave non-cooperatively and play a three-stage Nash game in location, quality and price. We examine the relationship between costs and differentiation, existence of equilibrium, and cost improvements and welfare. We extend the model to allow for asymmetrically observed or unobserved quality, cooperative pricing, a vertical as well as a horizontal component to market size, and less than perfect substitutability between goods.

Suggested Citation

  • Steffen Ziss, 1985. "Duopoly in a Model with Vertically and Horizontally Differentiated Products," Working Paper 604, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:604
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