Oligopoly, Endogenous Monopolist and Product Quality
This paper investigates an oligopolistic market with vertical product differentiation, where qualities are represented by a uni-dimensional interval. We examine the Nash equilibrium in the oligopoly game with a finite number of consumers, where each firm uses its technology and can offer a range of quality-price pairs, and firms' profits are determined by the consumers' selection choice. We show that under the standard conditions on consumers' preferences at most one firm with a positive profit can be active in equilibrium. In contrast, we present an example of a duopoly game with a continuum of consumers, in which both firms yield positive profits in an equilibrium. Finally, we analyze in the linear case the question of existence.
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Volume (Year): 7 (2007)
Issue (Month): 1 (August)
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