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Multi-product strategies and relative preferences for quality

Author

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  • Hend GHAZZAI

    () (Qatar University)

Abstract

In this paper we investigate whether a monopoly in a vertically differentiated market may have the incentive to adopt a multi-product strategy if the consumers are concerned by the other consumers' choices. We use a variant of the Mussa and Rosen model where the utility of a consumer is positively or negatively affected by her relative standing i.e how high or low is the quality she chooses with respect to the other consumers'' choices. We prove that a multi-product strategy may be adopted by the monopoly if the consumers'' social distinction desire is strong enough.

Suggested Citation

  • Hend GHAZZAI, 2008. "Multi-product strategies and relative preferences for quality," Economics Bulletin, AccessEcon, vol. 4(34), pages 1-10.
  • Handle: RePEc:ebl:ecbull:eb-08d40042
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    2. Acharyya, Rajat, 2005. "Quality discrimination among income constrained consumers," Economics Letters, Elsevier, vol. 86(2), pages 245-251, February.
    3. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    4. Acharyya, Rajat, 1998. "Monopoly and product quality: Separating or pooling menu?," Economics Letters, Elsevier, vol. 61(2), pages 187-194, November.
    5. Gabszewicz, Jean Jaskold, 1983. "Blue and Red Cars, or Blue Cars Only? A Note on Product Variety," Economica, London School of Economics and Political Science, vol. 50(198), pages 203-206, May.
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    Cited by:

    1. A. Mantovani & C. Vergari, 2013. "Hedonic vs Environmental Quality: Which Policy Can Help in Lowering Pollution Emissions?," Working Papers wp906, Dipartimento Scienze Economiche, Universita' di Bologna.

    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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