The option of joint purchase in vertically differentiated markets
Within the framework proposed by Mussa and Rosen (1978) for modelling quality differentiation, we allow consumers to buy simultaneously different variants of the same indivisible good. We call this the "joint purchase option". We show that this option dramatically affects price competition: while a unique equilibrium always prevails when consumers are assumed to make mutually exclusive purchases, either uniqueness, or multiplicity, or absence of price equilibrium arise when the joint purchase option is opened depending on the utility attached to joint purchase relative to separate purchases.
|Date of creation:||00 Mar 2001|
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jean Gabszewicz & Nathalie Sonnac & Xavier Wauthy, 2000.
"On Price Competition with Complementary Goods,"
2000-24, Centre de Recherche en Economie et Statistique.
- GABSZEWICZ, Jean & WAUTHY, Xavier, 2000. "Another perverse effect of monopoly power," CORE Discussion Papers 2000062, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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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