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Monopoly and Quality Omission

Author

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  • Amit Gayer

    (Economics and Management Department, Tel-Hai College, Qiryat Shemona 9977, Israel)

Abstract

This study delves into a market characterized by vertical product differentiation. Product qualities are represented on a one-dimensional interval scale. The research investigates the equilibrium within a monopoly scenario, considering a production cost that is strictly convex. The monopoly offers a strategy comprising various quality–price combinations, with consumer choices determining profits. The analysis involves a comparison between two analogous models: one with a continuous range of consumers and the other with a finite number of consumers. The study explores disparities in the potential for market failure between these two settings. Notably, numerical illustrations underscore these divergences in both market contexts.

Suggested Citation

  • Amit Gayer, 2024. "Monopoly and Quality Omission," Games, MDPI, vol. 15(6), pages 1-12, October.
    • Handle: RePEc:gam:jgames:v:15:y:2024:i:6:p:36-:d:1509115
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    References listed on IDEAS

    as
    1. Bos, Iwan & Marini, Marco A., 2019. "Cartel stability under quality differentiation," Economics Letters, Elsevier, vol. 174(C), pages 70-73.
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    7. Gayer Amit, 2007. "Oligopoly, Endogenous Monopolist and Product Quality," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-21, August.
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    12. Sutton, John, 1986. "Vertical Product Differentiation: Some Basic Themes," American Economic Review, American Economic Association, vol. 76(2), pages 393-398, May.
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