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Positional effects, product quality and regulation in duopoly

Author

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  • Luca LAMBERTINI

    (ENCORE, Faculty of Economics and Econometrics, University of Amsterdam)

  • Raimondello ORSINI

    (Department of Economics, University of Bologna)

Abstract

We investigate positional effects in a vertically differentiated duopoly, evaluated against the first best. Positional concerns distort the allocation of consumers across varieties, as well as the average quality. If the external effect is sufficiently relevant, the resulting welfare loss is increasing in the extent of the externality itself. The beneficial effect of regulation through a minimum quality standard is analysed.

Suggested Citation

  • Luca LAMBERTINI & Raimondello ORSINI, 2005. "Positional effects, product quality and regulation in duopoly," Discussion Papers (REL - Recherches Economiques de Louvain) 2005041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvre:2005041
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    References listed on IDEAS

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    Cited by:

    1. Luca Savorelli & Jacob Seifert, 2016. "Spatial competition and social welfare in the presence of non-monotonic network effects," Discussion Paper Series, School of Economics and Finance 201615, School of Economics and Finance, University of St Andrews, revised 06 Jun 2017.
    2. George Deltas & Eleftherios Zacharias, 2018. "Product Proliferation and Pricing in a Market with Positional Effects," Working Papers 242312853, Lancaster University Management School, Economics Department.
    3. Klarl, Torben, 2013. "Consumer's Environmental Awareness and the Role of (Green) Entrepreneurship: Lessons from Environmental Quality Competition and R&D Activities for Environmental Policy," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79729, Verein für Socialpolitik / German Economic Association.
    4. Evdokia Dritsa & Eleftherios Zacharias, 2012. "Price Competition in a Duopoly Characterized by Positional Effects," Working Papers 12-21, NET Institute.
    5. Dorothée Brécard, 2013. "Environmental Quality Competition and Taxation in the Presence of Green Network Effect Among Consumers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(1), pages 1-19, January.
    6. Petal Jean Hackett, 2012. "Cutting too Close? Design Protection and Innovation in Fashion Goods," CESifo Working Paper Series 3716, CESifo.

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    More about this item

    Keywords

    Positional externality; status siiking; vertical differential; quality standard;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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