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Perception and quality choice in vertically differentiated markets

  • Edward J. Webb

    (Department of Economics, Copenhagen University)

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    Consumers are assumed to be unable to discriminate between two goods of differing qualities provided that the qualities are close enough. It is shown that in a vertically differentiated duopoly this results in multiple equilibria. Demand for each firm's good is reduced. Firms' profits may be higher or lower depending on which equilibrium is selected.

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    File URL: http://www.econ.ku.dk/english/research/publications/wp/dp_2014/1407.pdf
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    Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 14-07.

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    Length: 20 pages
    Date of creation: 01 Feb 2014
    Date of revision:
    Handle: RePEc:kud:kuiedp:1407
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