Multiproduct Duopoly with Vertical Di¤erentiation
The paper investigates a two-stage competition in a vertical di¤erentiated industry, where each firm produces an rbitrary number of similar qualities and sells them to heterogeneous consumers. We show that, when unit costs of quality are increasing and quadratic, each firm has an incentive to provide an interval of qualities. The finding is in sharp contrast to the single-quality outcome when the market coverage is exogenously determined. We also show that allowing for an interval of qualities intensi es competition, lowers the profi ts of each fi rm and raises the consumer surplus and the social welfare in comparison to the single-quality duopoly.
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Web page: http://www.econ.sinica.edu.tw/index.php?foreLang=en
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- Gilbert, Richard J & Matutes, Carmen, 1993.
"Product Line Rivalry with Brand Differentiation,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 41(3), pages 223-240, September.
- Richard J. Gilbert and Carmen Matutes., 1989. "Product Line Rivalry with Brand Differentiation," Economics Working Papers 89-103, University of California at Berkeley.
- Gilbert, Richard J. & Matutes, Carmen, 1989. "Product Line Rivalry with Brand Differentiation," Department of Economics, Working Paper Series qt1nr3k6nk, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Wauthy, Xavier, 1996. "Quality Choice in Models of Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 345-353, September.
- Wauthy, X., 1994. "Quality Choice in Models of Vertical Differentiation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1994033, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Bonnisseau Jean-Marc & Lahmandi-Ayed Rim, 2006. "Vertical Differentiation: Multiproduct Strategy to Face Entry?," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-14, November.
- Jean-Marc Bonnisseau & Rim Lahmandi-Ayed, 2006. "Vertical Differentiation: Multiproduct Strategy to Face Entry?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00310490, HAL.
- Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-131, June.
- Gayer Amit, 2007. "Oligopoly, Endogenous Monopolist and Product Quality," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-21, August.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
- K. Sridhar Moorthy, 1988. "Product and Price Competition in a Duopoly," Marketing Science, INFORMS, vol. 7(2), pages 141-168.
- 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.
- K. Sridhar Moorthy, 1984. "Market Segmentation, Self-Selection, and Product Line Design," Marketing Science, INFORMS, vol. 3(4), pages 288-307. Full references (including those not matched with items on IDEAS)
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