Quality differentiation if market share matters
Using a vertical differentiation model, we investigate the product quality strategies of two competing firms maximizing market shares. The firms are facing variable costs of quality improvement and choose their prices under the constraint of nonnegative profits. We show that in equilibrium there is no differentiation in quality if the market coverage is either increasing or decreasing and concave in quality. Otherwise the existence of an equilibrium depends on the structure of the game. If the firms choose their qualities simultaneously there is no equilibrium, while there is an equilibrium with a first mover advantage and quality differentiation in the sequential quality competition.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jensen, Michael C., 2002. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Business Ethics Quarterly, Cambridge University Press, vol. 12(02), pages 235-256, April.
- Jaskold Gabszewicz, J. & Thisse, J. -F., 1979.
"Price competition, quality and income disparities,"
Journal of Economic Theory,
Elsevier, vol. 20(3), pages 340-359, June.
- Richard Steinberg, 1986. "The Revealed Objective Functions of Nonprofit Firms," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 508-526, Winter.
- Aoki, Reiko & Prusa, Thomas J., 1997. "Sequential versus simultaneous choice with endogenous quality," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 103-121, February.
- Boom, Anette, 1995. "Asymmetric International Minimum Quality Standards and Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 101-119, March.
When requesting a correction, please mention this item's handle: RePEc:zbw:hzvwps:25. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.