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On Vertical Differentiation Under Bertrand and Cournot: When Input Quality has Upward Sloping Supply

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  • Frascatore Mark R.

    (Clarkson University)

Abstract

This paper compares Bertrand and Cournot duopolies in which firms can vertically differentiate their products and in which input quality has upward sloping supply. Contrary to previous results, if supply is either linear or convex with a high coefficient, firms differentiate their products equally under Bertrand and Cournot, with one firm choosing the minimum quality. If supply is convex with a low coefficient, firms differentiate more under Bertrand. Profit and welfare implications are discussed, as is the strategic choice of quality as an entry deterrence strategy.

Suggested Citation

  • Frascatore Mark R., 2002. "On Vertical Differentiation Under Bertrand and Cournot: When Input Quality has Upward Sloping Supply," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-15, May.
    • Handle: RePEc:bpj:bejeap:v:topics.2:y:2002:i:1:n:5
    DOI: 10.2202/1538-0653.1002
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    Cited by:

    1. Shailendra Gajanan & Suman Basuroy & Srinath Beldona, 2007. "Category management, product assortment, and consumer welfare," Marketing Letters, Springer, vol. 18(3), pages 135-148, September.
    2. Miao, Zhuang, 2019. "Income Distribution, Vertical Differentiation, and the Quantity Competition," MPRA Paper 95104, University Library of Munich, Germany.

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