Quality and Quantity Competition
This article develops an oligopoly model where both prices and quality levels are determined at the equilibrium. Multiple symmetric equilibria arise when the distribution of consumers according to their willingness to pay is not uniform and more than one firm participates in the market. With a uniform distribution, we demonstrate that the impact of entry is to reduce average quality and to increase aggregate output. The implications for social welfare are ambiguous.
Volume (Year): 14 (1983)
Issue (Month): 2 (Autumn)
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