Multiproduct Duopoly with Vertical Differentiation
The paper investigates a two-stage competition in a vertical differentiated industry, where each firm produces an arbitrary 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 intensifies competition, lowers the profits of each firm and raises the consumer surplus and the social welfare in comparison to the single-quality duopoly.
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- K. Sridhar Moorthy, 1988. "Product and Price Competition in a Duopoly," Marketing Science, INFORMS, vol. 7(2), pages 141-168.
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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)
- 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.
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"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).
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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.
- K. Sridhar Moorthy, 1984. "Market Segmentation, Self-Selection, and Product Line Design," Marketing Science, INFORMS, vol. 3(4), pages 288-307.
- Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-31, June.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, March.
- 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 229-31, June.
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