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Strategic Product Design under Duopoly

Author

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  • Didier Laussel

Abstract

Two duopolists first decide in which proportions to incorporate in their product two different Lancasterian characteristics and then compete in quantities or prices. In the Cournot case, minimum differentiation obtains at equilibrium whatever the degree of substituability between the characteristics. In the Bertrand one, the equilibrium depends crucially on the degree of substituability/complementarity between the two characteristics. Maximal differential obtains if and only if the characteristics are strong enough substitutes. On the contrary as characteristics become closer and closer complements one obtains in the limit a minimal differentiation result.

Suggested Citation

  • Didier Laussel, 2018. "Strategic Product Design under Duopoly," Annals of Economics and Statistics, GENES, issue 131, pages 25-44.
    • Handle: RePEc:adr:anecst:y:2018:i:131:p:25-44
    DOI: 10.15609/annaeconstat2009.131.0025
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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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