Credence, goods and product differentiation

Jean Gabszewicz and Joana Resende

No 2011048, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper analyses price competition between two firms producing horizontally and vertically differentiated goods. These are assumed to be credence goods, as consumers can hardly ascertain the quality of the commodities. We provide sufficient conditions for the existence of a unique price equilibrium and we characterize it. To illustrate the model, we adapt it to represent a newspapers' industry with two outlets, when the population of readers have preferences both on the political stance of the newspapers and on the accuracy of news they dispatch.

Keywords: credence goods; horizontal differentiation; vertical differentiation; newspaper industry (search for similar items in EconPapers)
JEL-codes: L1 L13 L15 (search for similar items in EconPapers)
Date: 2011-10-28
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2011048

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