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Product Differentiation with Multiple Qualities

Author

Listed:
  • Francesca Barigozzi

    (Department of Economics, University of Bologna)

  • Ching-to Albert Ma

    (Boston University)

Abstract

We study subgame-perfect equilibria of the classical quality-price, multistage game of vertical product differentiation. Each firm can choose the levels of an arbitrary number of qualities. Consumers' valuations are drawn from independent and general distributions. The unit cost of production is increasing and convex in qualities. We characterize equilibrium prices, and the effects of qualities on the rival's equilibrium price in the general model. We present necessary and sufficient conditions for equilibrium differentiation in any of the qualities.

Suggested Citation

  • Francesca Barigozzi & Ching-to Albert Ma, 2017. "Product Differentiation with Multiple Qualities," Boston University - Department of Economics - Working Papers Series WP2018-003, Boston University - Department of Economics.
    • Handle: RePEc:bos:wpaper:wp2018-003
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    File URL: http://people.bu.edu/ma/multi-quality_Nov2017.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    multidimensional product differentiation; quality and price competition;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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