Endogenous vertical segmentation in a Cournot oligopoly

Paul Belleflamme and Valeria, Forlin
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Valeria, Forlin: CORE, UCLouvain and European Commission, DG Clima

No 2019007, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: An arbitrary number of (ex ante symmetric) firms first choose whether to produce a high-quality or a low-quality product and then the quantity of product to put on the market. We establish the following results: (i) there exists competition within and across quality segments; (ii) firms may be better off producing the low quality if competition within this segment is sufficiently low; (iii) a firm's switch across qualities may benefit all the other firms; (iv) there exists a unique partition of the firms between the two quality segments; (v) if high quality has a larger cost-quality ratio, then the equilibrium exhibits vertical differentiation; (vi) there may be too much differentiation from the consumers' point of view.

Keywords: quality; differentiation; oligopolistic competition (search for similar items in EconPapers)
JEL-codes: D43 L13 L25 (search for similar items in EconPapers)
Date: 2019-03-06
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-mic and nep-ore
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Related works:
Journal Article: Endogenous vertical segmentation in a Cournot oligopoly (2020)
Working Paper: Endogenous vertical segmentation in a Cournot oligopoly (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2019007

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