Multiproduct Duopoly with Vertical Di¤erentiation
AbstractThe paper investigates a two-stage competition in a vertical di¤erentiated industry, where each firm produces an rbitrary number of similar qualities and sells them to heterogeneous consumers. We show that, when unit costs of quality are increasing and quadratic, each firm has an incentive to provide an interval of qualities. The finding is in sharp contrast to the single-quality outcome when the market coverage is exogenously determined. We also show that allowing for an interval of qualities intensi es competition, lowers the profi ts of each fi rm and raises the consumer surplus and the social welfare in comparison to the single-quality duopoly.
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Bibliographic InfoPaper provided by Institute of Economics, Academia Sinica, Taipei, Taiwan in its series IEAS Working Paper : academic research with number 10-A004.
Length: 23 pages
Date of creation: Apr 2010
Date of revision:
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Web page: http://www.econ.sinica.edu.tw/index.php?foreLang=en
More information through EDIRC
multiproduct firms; market segmentation; quality competition; vertical product di¤erentiation.;
Other versions of this item:
- Cheng Yi-Ling & Peng Shin-Kun & Tabuchi Takatoshi, 2011. "Multiproduct Duopoly with Vertical Differentiation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-29, August.
- Yi-Ling Cheng & Shin-Kun Peng & Takatoshi Tabuchi, 2010. "Multiproduct Duopoly with Vertical Differentiation," CIRJE F-Series CIRJE-F-739, CIRJE, Faculty of Economics, University of Tokyo.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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- Bonnisseau Jean-Marc & Lahmandi-Ayed Rim, 2006. "Vertical Differentiation: Multiproduct Strategy to Face Entry?," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-14, November.
- K. Sridhar Moorthy, 1988. "Product and Price Competition in a Duopoly," Marketing Science, INFORMS, vol. 7(2), pages 141-168.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
- Evdokia Dritsa & Eleftherios Zacharias, 2012. "Price Competition in a Duopoly Characterized by Positional Effects," Working Papers 12-21, NET Institute.
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