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Vertically Differentiated Mixed Oligopoly with Quality-dependent Fixed Costs

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  • Stefan Lutz
  • Mario Pezzino

Abstract

type="main"> The paper studies duopolistic competition when firms face fixed quality-dependent costs of production and one of the two firms targets (at least in the long run) welfare maximization. We show that mixed oligopoly is in general socially desirable compared with a private duopoly regardless of the type of competition in the short run and the equilibrium quality ranking. In addition, the nationalization of one of the firms seems to be a more efficient regulatory instrument than the adoption of minimum quality standard or subsidization of the high-quality provider.

Suggested Citation

  • Stefan Lutz & Mario Pezzino, 2014. "Vertically Differentiated Mixed Oligopoly with Quality-dependent Fixed Costs," Manchester School, University of Manchester, vol. 82(5), pages 596-619, September.
  • Handle: RePEc:bla:manchs:v:82:y:2014:i:5:p:596-619
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    File URL: http://hdl.handle.net/10.1111/manc.12035
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    2. Bian, Junsong & Guo, Xiaolei & Li, Kevin W., 2015. "Distribution channel strategies in a mixed market," International Journal of Production Economics, Elsevier, vol. 162(C), pages 13-24.
    3. Benassi, Corrado & Castellani, Massimiliano & Mussoni, Maurizio, 2016. "Price equilibrium and willingness to pay in a vertically differentiated mixed duopoly," Journal of Economic Behavior & Organization, Elsevier, vol. 125(C), pages 86-96.
    4. Stefano Quarta & Skerdilajda Zanaj, 2018. "Health and Pollution in a Vertically Differentiated Duopoly," DEM Discussion Paper Series 18-20, Department of Economics at the University of Luxembourg.
    5. Iacopo Grassi, 2013. "Regulating quality: a comparison between minimum quality standards and mixed oligopoly," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2013(109), pages 25-44.
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    7. Alla Fridman, 2018. "Partial privatization in an exhaustible resource industry," Journal of Economics, Springer, vol. 124(2), pages 159-173, June.
    8. Peter Michaelis & Thomas Ziesemer, 0. "Minimum quality standards and benchmarking in differentiated duopoly," The Japanese Economic Review, Springer, vol. 0, pages 1-23.
    9. Kheiravar, Khaled H, 2019. "Economic and Econometric Analyses of the World Petroleum Industry, Energy Subsidies, and Air Pollution," Institute of Transportation Studies, Working Paper Series qt3gj151w9, Institute of Transportation Studies, UC Davis.

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