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Duopoly and Endogenous Single Product Quality Strategies

Author

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  • Amit Gayer

    (Tel-Hai College, Qiryat Shemona 9977, Israel)

Abstract

This research paper investigates a duopolistic market characterized by vertical product differentiation. The study considers both product qualities and consumer preferences represented as one-dimensional intervals. The focus is on analyzing the equilibrium in a duopoly game with convex production costs. In this setting, each firm has the option to present a multi-product strategy consisting of quality–price pairs, and their profits are determined by the decisions made by consumers. The findings of the study reveal that, under typical consumer preference conditions, both firms tend to offer a single quality–price pair. Additionally, the market is shown to be fully served, and firm profits decrease as the index of product quality increases. A comparative analysis is also conducted with the case of a monopoly.

Suggested Citation

  • Amit Gayer, 2023. "Duopoly and Endogenous Single Product Quality Strategies," Games, MDPI, vol. 14(4), pages 1-11, August.
    • Handle: RePEc:gam:jgames:v:14:y:2023:i:4:p:56-:d:1217675
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    References listed on IDEAS

    as
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