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Price and quality competition

Ioana Chioveanu ()

Journal of Economics, 2012, vol. 107, issue 1, 23-44

Abstract: This study considers an oligopoly model with simultaneous price and quality choice. Ex-ante homogeneous sellers compete by offering products at one of two quality levels. The consumers have heterogeneous tastes for quality: for some consumers it is efficient to buy a high quality product, while for others it is efficient to buy a low quality product. In the symmetric equilibrium firms use mixed strategies that randomize both price and quality, and obtain strictly positive profits. This framework highlights trade-offs which determine the impact of consumer protection policy in the form of quality standards. Copyright Springer-Verlag 2012

Keywords: Oligopoly; Price and quality competition; Quality standards; L13; L15; L50 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:107:y:2012:i:1:p:23-44

DOI: 10.1007/s00712-011-0259-z

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