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Multiproduct Duopoly with Vertical Di¤erentiation

Author

Listed:
  • Yi-Ling Cheng

    (National Taiwan University)

  • Shin-Kun Peng

    (Institute of Economics, Academia Sinica, Taipei, Taiwan
    National Taiwan University)

  • Takatoshi Tabuchi

    (Faculty of Economics, University of Tokyo)

Abstract

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.

Suggested Citation

  • Yi-Ling Cheng & Shin-Kun Peng & Takatoshi Tabuchi, 2010. "Multiproduct Duopoly with Vertical Di¤erentiation," IEAS Working Paper : academic research 10-A004, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    • Handle: RePEc:sin:wpaper:10-a004
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    Cited by:

    1. Sun, Shaoyan & An, Henry, 2013. "Reputation and Multiproduct-firm Behavior: Product Line and Price Rivalry Among Retailers," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151146, Agricultural and Applied Economics Association.
    2. Müller, Stephan & Götz, Georg, 2014. "Quality competition and entry deterrence: When to launch an extra brand," University of Göttingen Working Papers in Economics 223, University of Goettingen, Department of Economics.
    3. Amit Gayer, 2023. "Duopoly and Endogenous Single Product Quality Strategies," Games, MDPI, vol. 14(4), pages 1-11, August.
    4. Evdokia Dritsa & Eleftherios Zacharias, 2012. "Price Competition in a Duopoly Characterized by Positional Effects," Working Papers 12-21, NET Institute.
    5. Yi-Ling Cheng & Shin-Kun Peng, 2014. "Price competition and quality differentiation with multiproduct firms," Journal of Economics, Springer, vol. 112(3), pages 207-223, July.

    More about this item

    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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