Product Diversity in Asymmetric Oligopoly:Is the Quality of Consumer Goods Too Low?
We analyze an oligopoly model with horizontal di¤erentiation and quality di¤erences. High quality goods are over-priced and under-produced. When the market is fairly covered, low quality products may be pro…table when their social contribution is negative, leading to too many products in equilibrium. In a relatively uncovered market, even low quality goods are under-produced and there may be too few entrants. However, when …xed costs di¤er across qualities, the market may produce low quality goods when it should produce high quality ones. The model is calibrated using market data for yoghurt.
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- Raymond Deneckere & Michael Rothschild, 1986. "Monopolistic Competition and Preference Diversity," Discussion Papers 684, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Anderson, S. P. & De Palma, A. & Nesterov, Y., .
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CORE Discussion Papers RP
1179, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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- ANDERSON, Simon P. & DE PALMA, André & NESTEROV, Yurii, 1994. "Oligopolistic Competition and the Optimal Provision of Products," CORE Discussion Papers 1994034, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
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