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Endogenous vertical segmentation in a Cournot oligopoly

Paul Belleflamme () and Valeria Forlin ()
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Valeria Forlin: European Commission

Journal of Economics, 2020, vol. 131, issue 2, No 4, 195 pages

Abstract: Abstract An arbitrary number of (ex ante symmetric) firms first choose whether to produce a high-quality or a low-quality product and then, the quantity of product to put on the market. We establish the following results: (1) there exists competition within and across quality segments; (2) firms may be better off producing the low quality if competition within this segment is sufficiently low; (3) a firm’s switch across qualities may benefit all the other firms; (4) there exists a unique partition of the firms between the two quality segments; (5) if high quality has a larger cost-quality ratio, then the equilibrium exhibits vertical differentiation; (6) there may be too much differentiation from the consumers’ point of view.

Keywords: Quality; Differentiation; Oligopolistic competition (search for similar items in EconPapers)
JEL-codes: D43 L13 L25 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Endogenous vertical segmentation in a Cournot oligopoly (2020)
Working Paper: Endogenous vertical segmentation in a Cournot oligopoly (2019) Downloads
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DOI: 10.1007/s00712-020-00706-8

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