Oligopoly, Endogenous Monopolist and Product Quality

Gayer Amit
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Gayer Amit: Haifa University, amit_gayer@yahoo.com

The B.E. Journal of Theoretical Economics, 2007, vol. 7, issue 1, 21

Abstract: This paper investigates an oligopolistic market with vertical product differentiation, where qualities are represented by a uni-dimensional interval. We examine the Nash equilibrium in the oligopoly game with a finite number of consumers, where each firm uses its technology and can offer a range of quality-price pairs, and firms' profits are determined by the consumers' selection choice. We show that under the standard conditions on consumers' preferences at most one firm with a positive profit can be active in equilibrium. In contrast, we present an example of a duopoly game with a continuum of consumers, in which both firms yield positive profits in an equilibrium. Finally, we analyze in the linear case the question of existence.

Keywords: quality differentiation; Nash equilibria; decreasing differences; oligopoly vs. monopoly (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (4)

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DOI: 10.2202/1935-1704.1376

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