The Economics of Cannibalization: A Duopoly in which Firms Supply Two Vertically Differentiated Products

Ryoma Kitamura () and Tetsuya Shinkai ()

No 100, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: In this paper, we consider and propose a new duopoly model of cannibalization in which firms produce and sell two vertically differentiated products in the same market. We show that each firm produces the high-quality good more (less) than the low-quality good if the upper limit of taste of consumers is sufficiently high(not so high). Further, we find that the increase in the difference in quality between two goods leads to cannibalization, such that the high-quality goods keep out the low-quality goods from the market. Furthermore, we conduct a welfare analysis.

Keywords: Multiproduct firm; Duopoly; Cannibalization (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 L15 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2013-02, Revised 2013-02
New Economics Papers: this item is included in nep-bec and nep-com
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:100

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