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Vertical differentiation and labor market: the differentiation principle revisited

Author

Listed:
  • Amal Hili
  • Rim Lahmandi-Ayed

    () (LEGI - Laboratoire d'Économie et de Gestion Industrielle [Tunis] - Ecole Polytechnique de Tunisie)

  • Hejer Lasram

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)

Abstract

The labor market is introduced into the standard vertical differentiation model, linking increasingly the quality of the product and the effort necessary for workers to produce it. Surprisingly, when two firms compete on the product market but are monopolies on the labor market, at equilibrium they choose not to differentiate their products, which is different from the result obtained with standard vertical differentiation models.

Suggested Citation

  • Amal Hili & Rim Lahmandi-Ayed & Hejer Lasram, 2015. "Vertical differentiation and labor market: the differentiation principle revisited," Post-Print hal-01457404, HAL.
  • Handle: RePEc:hal:journl:hal-01457404
    Note: View the original document on HAL open archive server: https://hal-amu.archives-ouvertes.fr/hal-01457404
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    References listed on IDEAS

    as
    1. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-131, June.
    2. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
    3. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    4. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    5. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    6. Choi, Chong Ju & Shin, Hyun Song, 1992. "A Comment on a Model of Vertical Product Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 229-231, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    competition; labor market.; product market; vertical differentiation;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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