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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- Wauthy, Xavier, 1996.
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Journal of Industrial Economics,
Wiley Blackwell, vol. 44(3), pages 345-353, September.
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- Jean-Marc Bonnisseau & Rim Lahmandi-Ayed, 2006.
"Vertical Differentiation: Multiproduct Strategy to Face Entry?,"
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers)
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- K. Sridhar Moorthy, 1984. "Market Segmentation, Self-Selection, and Product Line Design," Marketing Science, INFORMS, vol. 3(4), pages 288-307.
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"Product Line Rivalry with Brand Differentiation,"
Department of Economics, Working Paper Series
qt1nr3k6nk, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- 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.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, September.
- 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.
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