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Endogenous vertical segmentation in a Cournot oligopoly

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  • BELLEFLAMME Paul,

    (CORE, UCLouvain)

  • FORLIN Valeria,

    (CORE, UCLouvain and European Commission, DG Clima)

Abstract

An arbitrary number of (ex ante symmetric) firms first choose whether to produce a high-quality or a low-quality product and then the quantity of product to put on the market. We establish the following results: (i) there exists competition within and across quality segments; (ii) firms may be better off producing the low quality if competition within this segment is sufficiently low; (iii) a firm's switch across qualities may benefit all the other firms; (iv) there exists a unique partition of the firms between the two quality segments; (v) if high quality has a larger cost-quality ratio, then the equilibrium exhibits vertical differentiation; (vi) there may be too much differentiation from the consumers' point of view.

Suggested Citation

  • BELLEFLAMME Paul, & FORLIN Valeria,, 2019. "Endogenous vertical segmentation in a Cournot oligopoly," LIDAM Discussion Papers CORE 2019007, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2019007
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    Cited by:

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    More about this item

    Keywords

    quality; differentiation; oligopolistic competition;
    All these keywords.

    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
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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