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The Multiproduct Monopolist Under Vertical Differentiations: an Inductive Approach

  • Luca Lambertini

An inductive procedure is adopted to evaluate the behaviour of a multiproduct profit seeking monopolist vis à vis that of a social planner, in a model where there is a continuum of consumers characterized by different marginal willingness to pay for the quality. When the market is completely covered, the monopolist undersupplies all qualities as long as their number is finite. When quality becomes continuous, the richest consumer is provided with the socially optimal quality. Under the alternative assumption of partial market coverage, the monopolist supplies the same qualities as the social planner, restricting though total output. Finally, it turns out that, for a given number of varieties, under partial market coverage the monopolist can make at least as good as under full market coverage, so that she prefers to distort quantity rather than quality.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 226.

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Date of creation: Sep 1995
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Handle: RePEc:bol:bodewp:226
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  1. Besanko, David & Donnenfeld, Shabtai & White, Lawrence J, 1987. "Monopoly and Quality Distortion: Effects and Remedies," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 743-67, November.
  2. Sheshinski, Eytan, 1976. "Price, Quality and Quantity Regulation in Monopoly Situations," Economica, London School of Economics and Political Science, vol. 43(17), pages 127-37, May.
  3. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  4. Bonanno, Giacomo, 1987. "Location Choice, Product Proliferation and Entry Deterrence," Review of Economic Studies, Wiley Blackwell, vol. 54(1), pages 37-45, January.
  5. Cremer, Helmuth & Thisse, Jacques-Francois, 1994. "Commodity Taxation in a Differentiated Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 613-33, August.
  6. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
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