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Too Much of a Good Thing: Quality-Differentiated Demand and Monopoly Bias

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  • Charles F. Adams

Abstract

Previous teaching notes focused on the logic and mechanics of a quality-differentiated linear demand structure. This note takes up the question of potential bias in how markets respond to quality-related aspects of consumer choice. Earlier examples demonstrated instances where monopoly interests might conflict with those of consumers in matters of quality choice. This article points to a more general propensity toward excessively high levels of quality under a monopoly market structure. JEL Classifications : D4, D41, D42

Suggested Citation

  • Charles F. Adams, 2022. "Too Much of a Good Thing: Quality-Differentiated Demand and Monopoly Bias," The American Economist, Sage Publications, vol. 67(1), pages 123-131, March.
    • Handle: RePEc:sae:amerec:v:67:y:2022:i:1:p:123-131
    DOI: 10.1177/0569434521999988
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    References listed on IDEAS

    as
    1. Hanemann, W Michael, 1984. "Discrete-Continuous Models of Consumer Demand," Econometrica, Econometric Society, vol. 52(3), pages 541-561, May.
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    4. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    5. Richard Blundell & Jean-Marc Robin, 2000. "Latent Separability: Grouping Goods without Weak Separability," Econometrica, Econometric Society, vol. 68(1), pages 53-84, January.
    6. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    7. Luca Lambertini & Piero Tedeschi, 2007. "Would You Like To Enter First With A Low‐Quality Good?," Bulletin of Economic Research, Wiley Blackwell, vol. 59(3), pages 269-282, July.
    8. Charles F. Adams, 2020. "An Undergraduate Primer on Quality-Differentiated Demand," The American Economist, Sage Publications, vol. 65(2), pages 277-283, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    quality-differentiated demand; monopoly; competition;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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