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The multiproduct monopolist under vertical differentiation : An inductive approach



    (Dipartimento di Scienze Economiche, Università degli Studi di Bologna)


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.

Suggested Citation

  • Luca LAMBERTINI, 1997. "The multiproduct monopolist under vertical differentiation : An inductive approach," Discussion Papers (REL - Recherches Economiques de Louvain) 1997021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvre:1997021

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    References listed on IDEAS

    1. David Besanko & Shabtai Donnenfeld & Lawrence J. White, 1987. "Monopoly and Quality Distortion: Effects and Remedies," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 743-767.
    2. Giacomo Bonanno, 1987. "Location Choice, Product Proliferation and Entry Deterrence," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 37-45.
    3. 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 613-633, August.
    4. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    5. Sheshinski, Eytan, 1976. "Price, Quality and Quantity Regulation in Monopoly Situations," Economica, London School of Economics and Political Science, vol. 43(17), pages 127-137, May.
    6. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-414, May.
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    Cited by:

    1. Luca Lambertini & Raimondello Orsini, 2005. "Positional effects, product quality and regulation in duopoly," Recherches économiques de Louvain, De Boeck Université, vol. 71(4), pages 367-381.
    2. Olivier Bonroy, 2006. "Le standard de qualité minimale est-il un instrument socialement optimal ?. Une revue de littérature," Revue économique, Presses de Sciences-Po, vol. 57(1), pages 35-53.
    3. L. Lambertini & R. Orsini, 1998. "Vertical Differentiation With A Positional Good," Working Papers 306, Dipartimento Scienze Economiche, Universita' di Bologna.
    4. Lambertini, Luca & Orsini, Raimondello, 2000. "Process and product innovation in a vertically differentiated monopoly," Economics Letters, Elsevier, vol. 68(3), pages 333-337, September.
    5. Luca Lambertini & Raimondello Orsini, 2015. "Quality Improvement and Process Innovation in Monopoly: A Dynamic Analysis," Working Paper series 15-12, Rimini Centre for Economic Analysis.
    6. Luca Lambertini & Piero Tedeschi, 2007. "Would You Like To Enter First With A Low-Quality Good?," Bulletin of Economic Research, Wiley Blackwell, vol. 59(3), pages 269-282, July.
    7. Bergès, Fabian & Bontems, Philippe & Réquillart, Vincent, 2003. "When Monopoly Oversupplies Quality," IDEI Working Papers 176, Institut d'Économie Industrielle (IDEI), Toulouse.

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    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies


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