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Fixed Costs and Equilibrium in Models of Vertical Differentiation
- Publication Year :
- 2000
- Publisher :
- Alma Mater Studiorum - UniversitĂ di Bologna, 2000.
-
Abstract
- I provide a full characterization of the quality choice in duopolies with vertical differentiation, without assuming ex-ante if the market is fully covered or not. This will allow to show that covered or uncovered market configurations are endogenous outcomes of firms’ strategic interaction. To this purpose, I assume that firms are characterized by quadratic fixed costs of quality improvements and check whether pure-strategy subgame perfect equilibria with a corner solution always exist. Finally, my results are compared to the quality choice that maximizes the total surplus of the economy. I show that the welfaremaximizing choice of qualities does not have to be found in the same market configuration of the corresponding market equilibrium.
- Subjects :
- SECS-P/02 Politica economica
Subjects
Details
- Database :
- OpenAIRE
- Accession number :
- edsair.doi...........e4994a81ecb8bb9ea7485cf7932e1510
- Full Text :
- https://doi.org/10.6092/unibo/amsacta/4861