Technological Progress and the Chamberlin Effect

Susanna Sällström

Journal of Industrial Economics, 1999, vol. 47, issue 4, 427-449

Abstract: A monopolist’s incentive to invest in cost‐reducing technological inventions may be detrimental to product quality. In a model with variable cost of quality and heterogeneous consumers there is a possibility of quality reductions when new technology makes larger scale production feasible. The effect on quality depends crucially on the number of varieties produced by the monopolist. If he produces just one variety, quality will be reduced, whereas if he produces two varieties quality reductions only appear for more efficient means of producing the high quality good.

Date: 1999
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