Product Line Strategy in a Vertically Differentiated Duopoly

Ryoma Kitamura () and Tetsuya Shinkai ()

No 134, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We consider a duopoly model in which firms with different costs supply two vertically differentiated products in the same market. We show that the efficient firm produces more of the high-quality good and the inefficient one produces more of the low-quality good in equilibrium. We also find that a change in the quality superiority of goods and relative cost efficiency ratios leads to cannibalization from one good to the other and characterize graphically the product line strategies of firms through the two ratios.

Keywords: Multi-product firm; Duopoly; Cannibalization; Vertical product differentiation (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 L15 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2015-08
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
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http://192.218.163.163/RePEc/pdf/kgdp134.pdf First version, 2015 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:134

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