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Technological Progress and the Chamberlain Effect

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  • Sallstrom, Susanna

Abstract

A monopolist's incentive to invest in cost-reducing technological inventions may be detrimental to product quality. In a model with variable cost of quality and heterogeneous consumers there is a possibility of quality reductions when new technology makes larger scale production feasible. The effect on quality depends crucially on the number of varieties produced by the monopolist. If he produces just one variety, quality will be reduced, whereas if he produces two varieties quality reductions only appear for more efficient means of producing the high quality good. Copyright 1999 by Blackwell Publishing Ltd

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  • Sallstrom, Susanna, 1999. "Technological Progress and the Chamberlain Effect," Journal of Industrial Economics, Wiley Blackwell, vol. 47(4), pages 427-449, December.
  • Handle: RePEc:bla:jindec:v:47:y:1999:i:4:p:427-49
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    Cited by:

    1. Gabszewicz, Jean J. & Wauthy, Xavier Y., 2002. "Quality underprovision by a monopolist when quality is not costly," Economics Letters, Elsevier, vol. 77(1), pages 65-72, September.
    2. Sällström, Susanna, 2009. "Functional Differentiation," CEPR Discussion Papers 7187, C.E.P.R. Discussion Papers.
    3. Swapnendu Bandyopadhyay & Rajat Acharyya, 2004. "Process and Product Innovation: Complementarity in a Vertically Differentiated Monopoly with Discrete Consumer Types," The Japanese Economic Review, Japanese Economic Association, vol. 55(2), pages 175-200.

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