IDEAS home Printed from https://ideas.repec.org/p/vir/virpap/349.html
   My bibliography  Save this paper

Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods too Low?

Author

Listed:
  • Simon P. Anderson
  • André de Palma

Abstract

We analyze an oligopoly model with horizontal di¤erentiation and quality di¤erences. High quality goods are over-priced and under-produced. When the market is fairly covered, low quality products may be pro…table when their social contribution is negative, leading to too many products in equilibrium. In a relatively uncovered market, even low quality goods are under-produced and there may be too few entrants. However, when …xed costs di¤er across qualities, the market may produce low quality goods when it should produce high quality ones. The model is calibrated using market data for yoghurt.

Suggested Citation

  • Simon P. Anderson & André de Palma, 2000. "Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods too Low?," Virginia Economics Online Papers 349, University of Virginia, Department of Economics.
  • Handle: RePEc:vir:virpap:349
    as

    Download full text from publisher

    File URL: http://repec.as.virginia.edu/RePEc/vir/virpap/papers/virpap349.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 43(2), pages 217-235.
    2. Anderson, Simon P & de Palma, Andre & Nesterov, Yurii, 1995. "Oligopolistic Competition and the Optimal Provision of Products," Econometrica, Econometric Society, vol. 63(6), pages 1281-1301, November.
    3. Raymond Deneckere & Michael Rothschild, 1986. "Monopolistic Competition and Preference Diversity," Discussion Papers 684, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simon P. Anderson & André de Palma, 2001. "Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods too Low?," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 113-135, June.
    2. Pierre M. Picard & Eric Toulemonde, 2009. "On monopolistic competition and optimal product diversity: workers' rents also matter," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(4), pages 1347-1360, November.
    3. Simon P. Anderson & Régis Renault & Claude Jessua, 1996. "Produits différenciés et information imparfaite des consommateurs," Revue Économique, Programme National Persée, vol. 47(3), pages 425-435.
    4. Simon P. Anderson & André De Palma, 2006. "Market Performance With Multiproduct Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 54(1), pages 95-124, March.
    5. Anderson, Simon P. & de Palma, Andre, 2000. "From local to global competition," European Economic Review, Elsevier, vol. 44(3), pages 423-448, March.
    6. Gotz, Georg, 2002. "Sunk costs, windows of profit opportunities, and the dynamics of entry," International Journal of Industrial Organization, Elsevier, vol. 20(10), pages 1409-1436, December.
    7. Parenti, Mathieu & Ushchev, Philip & Thisse, Jacques-François, 2017. "Toward a theory of monopolistic competition," Journal of Economic Theory, Elsevier, vol. 167(C), pages 86-115.
    8. Marjit, Sugata & Mukherjee, Arijit, 2013. "Foreign competition and social efficiency of entry," Economic Modelling, Elsevier, vol. 32(C), pages 108-112.
    9. Jacques-François Thisse & Philip Ushchev, 2018. "Monopolistic competition without apology," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume I, chapter 5, pages 93-136, Edward Elgar Publishing.
    10. Schmidt, Robert C., 2009. "Welfare in differentiated oligopolies with more than two firms," International Journal of Industrial Organization, Elsevier, vol. 27(4), pages 501-507, July.
    11. Arijit Mukherjee & Udo Broll & Soma Mukherjee, 2009. "The welfare effects of entry: the role of the input market," Journal of Economics, Springer, vol. 98(3), pages 189-201, December.
    12. Steven T. Berry & Joel Waldfogel, 1999. "Free Entry and Social Inefficiency in Radio Broadcasting," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 397-420, Autumn.
    13. Andre dePalma & Karim Kilani, 2000. "The Optimal of Provision of Products with Income Effects," Econometric Society World Congress 2000 Contributed Papers 1299, Econometric Society.
    14. de Palma, A. & Sanchez, O., 1998. "Accessibilite dans un systeme de transport en environnement concurrentiel," Papers 9804, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
    15. Cabral, Luis M. B., 2004. "Simultaneous entry and welfare," European Economic Review, Elsevier, vol. 48(5), pages 943-957, October.
    16. Simon P. Anderson & Bruno Jullien, 2015. "The advertising-financed business model in two-sided media markets," Post-Print hal-02866192, HAL.
    17. Steven T. Berry & Joel Waldfogel, 1999. "Mergers, Station Entry, and Programming Variety in Radio Broadcasting," NBER Working Papers 7080, National Bureau of Economic Research, Inc.
    18. Arijit Mukherjee & Soma Mukherjee, 2008. "Excess‐Entry Theorem: The Implications Of Licensing," Manchester School, University of Manchester, vol. 76(6), pages 675-689, December.
    19. Simon P. Anderson & Andre de Palma, 1989. "The Logit as a Model of Product Differentiation: Further Results and Extensions," Discussion Papers 913, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    20. Aseem Kaul & Jiao Luo, 2018. "An economic case for CSR: The comparative efficiency of for‐profit firms in meeting consumer demand for social goods," Strategic Management Journal, Wiley Blackwell, vol. 39(6), pages 1650-1677, June.

    More about this item

    Keywords

    Product di¤erentiation; asymmetric oligopoly; quality; optimum and equilibrium variety; discrete choice models.;
    All these keywords.

    JEL classification:

    • 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
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vir:virpap:349. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Debby Stanford (email available below). General contact details of provider: http://www.virginia.edu/economics/home.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.