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How Do the Relative Superiority of a High-quality Good and Cost Inefficiency between Firms Affect Product Lines in Multiproduct Firms?

Author

Listed:
  • Tetsuya Shinkai

    (School of Economics, Kwansei Gakuin University)

  • Ryoma Kitamura

    (Faculty of Economics, Otemon Gakuin University)

Abstract

We consider the product line strategies of duopolistic firms, each of which can supply two vertically differentiated products under nonnegative output constraints and expectations of their rival's product line reaction. Considering a game of firms with heterogeneous (homogeneous) unit costs for high- (low-) quality products, we derive the equilibria of the game and explore the effects of the relative superiority of the high-quality product and relative cost efficiency on the equilibrium outcomes and illustrate the result using the production substitution of differentiated goods within a firm and the high-quality good between firms.

Suggested Citation

  • Tetsuya Shinkai & Ryoma Kitamura, 2021. "How Do the Relative Superiority of a High-quality Good and Cost Inefficiency between Firms Affect Product Lines in Multiproduct Firms?," Discussion Paper Series 230, School of Economics, Kwansei Gakuin University.
    • Handle: RePEc:kgu:wpaper:230
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    References listed on IDEAS

    as
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    2. Avner Shaked & John Sutton, 1990. "Multiproduct Firms and Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 45-62, Spring.
    3. Kitamura, Ryoma & Shinkai, Tetsuya, 2015. "Product line strategy within a vertically differentiated duopoly," Economics Letters, Elsevier, vol. 137(C), pages 114-117.
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    11. Ryoma Kitamura & Tetsuya Shinkai, 2013. "The Economics of Cannibalization: A Duopoly in which Firms Supply Two Vertically Differentiated Products," Discussion Paper Series 100, School of Economics, Kwansei Gakuin University, revised Feb 2013.
    12. Ryoma Kitamura & Tetsuya Shinkai, 2014. "Cannibalization within the Single Vertically Di¤erentiated Duopoly," Discussion Paper Series 124, School of Economics, Kwansei Gakuin University, revised Dec 2014.
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    More about this item

    Keywords

    Multiproduct firm; Product line; Vertical product differentiation;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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