 Vertical product differentiation, managerial delegation and social welfare in a vertically-related marketXingtang Wang and Leonard F.S. Wang Mathematical Social Sciences, 2021, vol. 113, issue C, 149-159 Abstract: In this paper, we analyze the influence of the delegation of downstream firms that produce different quality of products on the profits, consumer surplus and social welfare in a vertically related market. We find that whether it is price or quantity competition, the delegation can enable the downstream firms to grab the profits from their input suppliers. A downstream firm that produces a high-quality product earns more from suppliers than that producing a low-quality product; however, the delegation of downstream firms brings about the reduction of consumer surplus and social welfare. Further analysis has revealed that delegation adopted by downstream firms reverses their profit comparisons under different competitive modes; that is, the downstream firms produce higher profits under quantity competition without delegation while possessing higher profits under price competition with delegation. Keywords: Vertical product differentiation; Managerial delegation; Quantity competition; Price competition (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:113:y:2021:i:c:p:149-159 DOI: 10.1016/j.mathsocsci.2021.06.001 Access Statistics for this article Mathematical Social Sciences is currently edited by J.-F. Laslier More articles in Mathematical Social Sciences from Elsevier |
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