Perception and quality choice in vertically differentiated markets

Edward J. Webb
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Edward J. Webb: Department of Economics, Copenhagen University

No 14-07, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: Consumers are assumed to be unable to discriminate between two goods of differing qualities provided that the qualities are close enough. It is shown that in a vertically differentiated duopoly this results in multiple equilibria. Demand for each firm's good is reduced. Firms' profits may be higher or lower depending on which equilibrium is selected.

Keywords: Perception; bounded rationality; vertical differentiation; oligopoly (search for similar items in EconPapers)
JEL-codes: D03 D43 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2014-02-01
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (2)

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