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Beyond the Uniform Distribution: Equilibrium Prices and Qualities in a Vertically Differentiated Duopoly

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  • C. Benassi
  • A. Chirco
  • C. Colombo

Abstract

The paper proves the existence of a subgame perfect Nash equilibrium in a vertically differentiated duopoly with uncovered market, for a large set of symmetric and asymmetric distributions of consumers, including, among others, all logconcave distributions. The proof relies on the income share elasticity representation of the consumers density function, which ensures the analytical tractability of the firms optimality conditions at a high level of generality. Some illustrative examples of the solution are offered, in order to assess the impact of distributive shocks on the equilibrium market configuration.

Suggested Citation

  • C. Benassi & A. Chirco & C. Colombo, 2015. "Beyond the Uniform Distribution: Equilibrium Prices and Qualities in a Vertically Differentiated Duopoly," Working Papers wp1044, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp1044
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    References listed on IDEAS

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    Cited by:

    1. Barigozzi, Francesca & Ma, Ching-to Albert, 2018. "Product differentiation with multiple qualities," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 380-412.

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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