Price equilibrium and willingness to pay in a vertically differentiated mixed duopoly

Corrado Benassi, M. Castellani and Maurizio Mussoni

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: In the framework of a vertically differentiated mixed duopoly, with uncovered market and costless quality choice, we study the existence of a price equilibrium when a welfare-maximizing public firm producing low quality goods competes against a profit-maximizing private firm producing high quality goods. We show that a price equilibrium exists if the quality spectrum is wide enough vis vis a measure of the convexity of the distribution of the consumers' willingness to pay, and that such equilibrium is unique if this sufficient condition is tightened. Log-concavity of the income distribution is inconsistent with the existence of equilibrium.

JEL-codes: D43 L13 L51 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-com and nep-ind
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Related works:
Journal Article: Price equilibrium and willingness to pay in a vertically differentiated mixed duopoly (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp1012

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