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Product Differentiation with Multiple Qualities

Francesca Barigozzi and Ching-to Ma ()

No WP2018-003, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: We study subgame-perfect equilibria of the classical quality-price, multistage game of vertical product differentiation. Each firm can choose the levels of an arbitrary number of qualities. Consumers' valuations are drawn from independent and general distributions. The unit cost of production is increasing and convex in qualities. We characterize equilibrium prices, and the effects of qualities on the rival's equilibrium price in the general model. We present necessary and sufficient conditions for equilibrium differentiation in any of the qualities.

Keywords: multidimensional product differentiation; quality and price competition (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-mkt
Date: 2017-11
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Journal Article: Product differentiation with multiple qualities (2018) Downloads
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