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Product differentiation in successive vertical oligopolies

  • BELLEFLAMME, Paul
  • TOULEMONDE, Eric

This is a successive oligopoly model with two varieties of a final product. Downstream firms choose one variety to sell on a final market. Upstream firms specialize in the production of one input specifically designed for one variety, but they also produce the input for the other variety at an extra cost. We show that as more downstream firms choose one particular variety, more upstream firms specialize in the input specific to that variety, and vice-versa. Multiple equilibria may result, and the softening effect of product differentiation on competition might not be strong enough to induce maximal differentiation.

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File URL: http://dx.doi.org/10.1111/1540-5982.t01-2-00001
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -1720.

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Handle: RePEc:cor:louvrp:-1720
Note: In : Canadian Journal of Economic/Revue canadienne d'Economique, 36(3), 523-545, 2003
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  7. Michael A. Einhorn, 1992. "Mix and Match Compatibility with Vertical Product Dimensions," RAND Journal of Economics, The RAND Corporation, vol. 23(4), pages 535-547, Winter.
  8. Alford, Dave & Sackett, Peter & Nelder, Geoff, 2000. "Mass customisation -- an automotive perspective," International Journal of Production Economics, Elsevier, vol. 65(1), pages 99-110, April.
  9. NORMAN, George & THISSE, Jacques-François, 1996. "Technology choice and market structure : strategic aspects of flexible manufacturing," CORE Discussion Papers 1996059, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Matutes, Carmen & Regibeau, Pierre, 1992. "Compatibility and Bundling of Complementary Goods in a Duopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 37-54, March.
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