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Product Quality With Heterogeneous Consumers and Linear Pricing

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  • Hugh Sibly

Abstract

This paper considers a linear†pricing monopolist that conducts vertical product differentiation. Previous analyses consider customers who either have unit demand or firms who conduct nonlinear pricing. In this paper, customers’ opportunity cost of time generates a demand for quality. Customers differ in either their demand, income or taste for quality. Differences in income and taste for quality are sources of vertical differentiation. The presence of quality distortion and the variety that may exhibit it are dependent on the functional form of the customer types’ demand.

Suggested Citation

  • Hugh Sibly, 2017. "Product Quality With Heterogeneous Consumers and Linear Pricing," Australian Economic Papers, Wiley Blackwell, vol. 56(4), pages 328-351, December.
    • Handle: RePEc:bla:ausecp:v:56:y:2017:i:4:p:328-351
    DOI: 10.1111/1467-8454.12105
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    References listed on IDEAS

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