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Endogenous vertical segmentation in a Cournot oligopoly

Author

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  • BELLEFLAMME Paul,

    (CORE, UCLouvain)

  • FORLIN Valeria,

    (CORE, UCLouvain and European Commission, DG Clima)

Abstract

An arbitrary number of (ex ante symmetric) firms first choose whether to produce a high-quality or a low-quality product and then the quantity of product to put on the market. We establish the following results: (i) there exists competition within and across quality segments; (ii) firms may be better off producing the low quality if competition within this segment is sufficiently low; (iii) a firm's switch across qualities may benefit all the other firms; (iv) there exists a unique partition of the firms between the two quality segments; (v) if high quality has a larger cost-quality ratio, then the equilibrium exhibits vertical differentiation; (vi) there may be too much differentiation from the consumers' point of view.

Suggested Citation

  • BELLEFLAMME Paul, & FORLIN Valeria,, 2019. "Endogenous vertical segmentation in a Cournot oligopoly," LIDAM Discussion Papers CORE 2019007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2019007
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    Cited by:

    1. is not listed on IDEAS
    2. Valeria Forlin, 2021. "Optimal Eco‐Label Standards in an Oligopolistic Setting," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 682-701, March.
    3. Chen, You-hua & Chen, Liu-man & Mishra, Ashok K., 2021. "Information, Capacity Constraints and Quality on Firms Competition," 2021 ASAE 10th International Conference (Virtual), January 11-13, Beijing, China 329427, Asian Society of Agricultural Economists (ASAE).
    4. Keisuke Hattori & Keisaku Higashida, 2023. "Who should be regulated: Genuine producers or third parties?," Journal of Economics, Springer, vol. 138(3), pages 249-286, April.
    5. Haitao CHENG & Jota ISHIKAWA & Nori TARUI, 2025. "Green Consumption and Corporate Environmental Responsibility in North-South Trade," Discussion papers 25043, Research Institute of Economy, Trade and Industry (RIETI).
    6. A. Cavaliere & G. Crea, 2022. "Brand premia driven by perceived vertical differentiation in markets with information disparity and optimistic consumers," Journal of Economics, Springer, vol. 135(3), pages 223-253, April.

    More about this item

    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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