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Who is more aggressive under vertical product differentiation?

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  • Xingtang Wang

Abstract

In this paper, we introduce quality differences in vertical market and compare the managerial delegation contracts of downstream firms. We find that the owner of a downstream firm that produces low‐quality products induces the manager to behave more aggressively when the marginal cost coefficient is low. While when marginal cost coefficient is high, the owner of a downstream firm that produces high‐quality products induces the manager to behave more aggressively. It is further found that managerial delegation can improve the profits of downstream firms but reduce the consumer surplus and social welfare.

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  • Xingtang Wang, 2023. "Who is more aggressive under vertical product differentiation?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 608-618, January.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:1:p:608-618
    DOI: 10.1002/mde.3703
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    References listed on IDEAS

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    1. Xingtang Wang & Lin Zhang, 2022. "Monopolistic third-degree price discrimination, welfare, and vertical market structure," Review of Economic Design, Springer;Society for Economic Design, vol. 26(1), pages 75-86, March.
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