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Vertically Differentiated Monopoly with a Positional Good

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  • Lambertini, Luca
  • Orsini, Raimondello

Abstract

We analyse positional effects in a monopoly market with vertical differentiation, comparing monopoly and social planning. The provision of quality under monopoly depends upon the relative size of positional effects and the hedonic evaluation of quality. An elitarian equilibrium where quality increases in the level of positional concern emerges under monopoly, only if the market is sufficiently rich. Under social planning, quality increases in the level of positional externality, independently of market affluency. As long as partial market coverage obtains under both regimes, the monopoly deadweight loss decreases as the positional externality becomes more relevant. Copyright 2002 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

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  • Lambertini, Luca & Orsini, Raimondello, 2002. "Vertically Differentiated Monopoly with a Positional Good," Australian Economic Papers, Wiley Blackwell, vol. 41(2), pages 151-163, June.
  • Handle: RePEc:bla:ausecp:v:41:y:2002:i:2:p:151-63
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    Cited by:

    1. Luca Lambertini & Raimondello Orsini, 2005. "Positional effects, product quality and regulation in duopoly," Recherches économiques de Louvain, De Boeck Université, vol. 71(4), pages 367-381.
    2. Evdokia Dritsa & Eleftherios Zacharias, 2012. "Price Competition in a Duopoly Characterized by Positional Effects," Working Papers 12-21, NET Institute.
    3. Wai Chiu Woo, 2016. "Quantity versus variety: Which aspect does status-seeking promote?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 63(2), pages 93-106, June.
    4. Petal Jean Hackett, 2012. "Cutting too Close? Design Protection and Innovation in Fashion Goods," CESifo Working Paper Series 3716, CESifo Group Munich.

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