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Too Much of a Good Thing: Quality-Differentiated Demand and Monopoly Bias

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  • Charles F. Adams

Abstract

Previous teaching notes focused on the logic and mechanics of a quality-differentiated linear demand structure. This note takes up the question of potential bias in how markets respond to quality-related aspects of consumer choice. Earlier examples demonstrated instances where monopoly interests might conflict with those of consumers in matters of quality choice. This article points to a more general propensity toward excessively high levels of quality under a monopoly market structure. JEL Classifications : D4, D41, D42

Suggested Citation

  • Charles F. Adams, 2022. "Too Much of a Good Thing: Quality-Differentiated Demand and Monopoly Bias," The American Economist, Sage Publications, vol. 67(1), pages 123-131, March.
    • Handle: RePEc:sae:amerec:v:67:y:2022:i:1:p:123-131
    DOI: 10.1177/0569434521999988
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    References listed on IDEAS

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    2. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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    5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    6. Charles F. Adams, 2020. "An Undergraduate Primer on Quality-Differentiated Demand," The American Economist, Sage Publications, vol. 65(2), pages 277-283, October.
    7. Hanemann, W Michael, 1984. "Discrete-Continuous Models of Consumer Demand," Econometrica, Econometric Society, vol. 52(3), pages 541-561, May.
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    More about this item

    Keywords

    quality-differentiated demand; monopoly; competition;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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