Multiproduct Duopoly with Vertical Differentiation

Yi-Ling Cheng, Shin-Kun Peng () and Takatoshi Tabuchi
Additional contact information
Yi-Ling Cheng: Department of Economics, National Taiwan University

No CIRJE-F-739, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: The paper investigates a two-stage competition in a vertical differentiated industry, where each firm produces an arbitrary number of similar qualities and sells them to heterogeneous consumers. We show that, when unit costs of quality are increasing and quadratic, each firm has an incentive to provide an interval of qualities. The finding is in sharp contrast to the single-quality outcome when the market coverage is exogenously determined. We also show that allowing for an interval of qualities intensifies competition, lowers the profits of each firm and raises the consumer surplus and the social welfare in comparison to the single-quality duopoly.

Pages: 25pages
Date: 2010-04
New Economics Papers: this item is included in nep-bec and nep-com
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Citations: View citations in EconPapers (1)

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http://www.cirje.e.u-tokyo.ac.jp/research/dp/2010/2010cf739.pdf (application/pdf)

Related works:
Journal Article: Multiproduct Duopoly with Vertical Differentiation (2011)
Working Paper: Multiproduct Duopoly with Vertical Di¤erentiation (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2010cf739

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