On the Robustness of the High-Quality Advantage under Vertical Differentiation

Robert Schmidt

Journal of Industry, Competition and Trade, 2006, vol. 6, issue 3, 183-193

Abstract: The idea that the high-quality provider in a vertically differentiated duopoly earns the higher profit (the so-called “high-quality advantage”) appears to be an established fact among economists. This note shows that the high-quality advantage is not a robust feature of vertical differentiation models. A low-quality advantage can be predicted under perfectly plausible assumptions, such as a concave utility–quality and/or a convex unit cost–quality relation. The existence of a high- or a low-quality advantage depends on the nature of the firms’ strategic interaction. Copyright Springer Science + Business Media, LLC 2006

Keywords: vertical differentiation; high-quality advantage; maximum differentiation; covered market equilibrium; non-linearity; L13; L15 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10842-006-0029-8 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jincot:v:6:y:2006:i:3:p:183-193

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/10842/PS2

DOI: 10.1007/s10842-006-0029-8

Access Statistics for this article

Journal of Industry, Competition and Trade is currently edited by Karl Aiginger, Marcel Canoy and Michael Peneder

More articles in Journal of Industry, Competition and Trade from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().