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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- Anderson, Simon P & de Palma, Andre & Nesterov, Yurii, 1995.
"Oligopolistic Competition and the Optimal Provision of Products,"
Econometric Society, vol. 63(6), pages 1281-1301, November.
- ANDERSON, SimonÂ P. & DE PALMA, AndrÃ© & 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).
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- Deneckere, Raymond J & Rothschild, Michael, 1992.
"Monopolistic Competition and Preference Diversity,"
Review of Economic Studies,
Wiley Blackwell, vol. 59(2), pages 361-73, April.
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