Price and Quality Competition
Ioana Chioveanu ()
MPRA Paper from University Library of Munich, Germany
This study considers an oligopoly model with simultaneous price and quality choice. Ex-ante homogeneous sellers compete by offering products at one of two quality levels. The consumers have heterogeneous tastes for quality: for some consumers it is efficient to buy a high quality product, while for others it is efficient to buy a low quality product. In the symmetric equilibrium firms use mixed strategies that randomize both price and quality, and obtain strictly positive profits. This framework highlights trade-offs which determine the impact of consumer protection policy in the form of quality standards.
Keywords: Oligopoly; Price and quality competition; Quality standards (search for similar items in EconPapers)
JEL-codes: L5 L13 L15 (search for similar items in EconPapers)
Date: 2009-08-01, Revised 2010-02-01
New Economics Papers: this item is included in nep-com, nep-ind, nep-mkt and nep-tid
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Journal Article: Price and quality competition (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:21647
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