Economics at your fingertips  

Product Varieties in a Quality-Differentiated Goods Monopoly

Changying Li () and Jianhu Zhang

Journal of Institutional and Theoretical Economics (JITE), 2019, vol. 175, issue 3, 524-536

Abstract: This paper analyzes market versus optimal product varieties in a vertically differentiated goods monopoly. Four results are obtained. First, compared to the first- or second-best optimum, product varieties are always undersupplied by a monopolist. Second, the quality range under a monopoly is smaller than that under the first- or second-best optimum. Third, the monopolist distorts the lowest quality upward while distorting the highest quality downward. Finally, a fixed-cost subsidy can lead to a second-best outcome where a social planner determines the number of product varieties and the corresponding qualities, and the monopolist decides the prices.

Keywords: monopoly; product varieties; quality distortion; variable-cost (fixed-cost) subsidy; first-best (second-best) optimum (search for similar items in EconPapers)
JEL-codes: L12 D42 L52 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) ... 101628jite-2018-0014
Fulltext access is included for subscribers to the printed version.

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:

Ordering information: This journal article can be ordered from
Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany

DOI: 10.1628/jite-2018-0014

Access Statistics for this article

Journal of Institutional and Theoretical Economics (JITE) is currently edited by Gerd Mühlheußer and Bayer, Ralph-C

More articles in Journal of Institutional and Theoretical Economics (JITE) from Mohr Siebeck, Tübingen
Bibliographic data for series maintained by Thomas Wolpert ().

Page updated 2020-06-06
Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2018-0014