Positional effects, product quality and regulation in duopoly
We investigate positional effects in a vertically differentiated duopoly, evaluated against the first best. Positional concerns distort the allocation of consumers across varieties, as well as the average quality. If the external effect is sufficiently relevant, the resulting welfare loss is increasing in the extent of the externality itself. The beneficial effect of regulation through a minimum quality standard is analysed.
Volume (Year): 71 (2005)
Issue (Month): 4 ()
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