Vertical Product Differentiation

Takanori Adachi, Ryo Hashizume (), Takeshi Ikeda (), Tatsuhiko Nariu () and Tomohisa Okada ()
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Ryo Hashizume: Hannan University
Takeshi Ikeda: Daito Bunka University
Tatsuhiko Nariu: Doshisha University
Tomohisa Okada: Daito Bunka University

Chapter Chapter 3 in Recent Advances in the Theory of Third-Degree Price Discrimination, 2023, pp 29-42 from Springer

Abstract: Abstract In this chapter, we examine the welfare effects of monopolistic and duopolistic third-degree price discrimination (PD) under vertical product differentiation. We find that monopolistic PD under a fixed cost of quality increases social welfare because PD enhances the quality of goods. However, monopolistic PD under variable cost of quality reduces social welfare because quality improvement leads to higher production costs. Moreover, duopolistic PD under a fixed cost of quality enhances social welfare and the total consumer surplus because duopolistic competition constricts rising prices by PD.

Keywords: Third-degree price discrimination; Vertical product differentiation; Product quality; Monopoly; Duopoly (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spbchp:978-981-99-3205-4_3

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DOI: 10.1007/978-981-99-3205-4_3

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