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

Simon Anderson () and André de Palma ()

Virginia Economics Online Papers from University of Virginia, Department of Economics

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.

Keywords: Product di¤erentiation; asymmetric oligopoly; quality; optimum and equilibrium variety; discrete choice models. (search for similar items in EconPapers)
JEL-codes: L11 L13 D43 (search for similar items in EconPapers)
Date: 2000-06
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Related works:
Working Paper: Product Diversity in Asymmetric Oligopoly:Is the Quality of Consumer Goods Too Low? (1995)
Journal Article: Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods Too Low? (2001)
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Persistent link: http://EconPapers.repec.org/RePEc:vir:virpap:349

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