Bidimensional vertical differentiation Original Research Article

• Autores: Paolo G. Garella, Luca Lambertini
• Localización: International journal of industrial organization, ISSN 0167-7187, Vol. 32, Nº. 1, 2014, págs. 1-10
• Idioma: inglés
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• Resumen

  • In markets where product quality is important, more than one characteristic is usually necessary for producers to define product quality. Standard theory maintains that: (i) in a duopoly there will be a quality leader no matter whether the product can incorporate one or two vertical attributes; (ii) differentiation pertains only to one attribute. By contrast, in our set-up, there are also equilibria where the quality leader is better in two attributes, and others where there is cross leadership, namely a situation where each firm designs a product to dominate the other in one characteristic. Applications to Minimum Quality Standards and tax (subsidy) on quality products are sketched, showing spill-over effects from one to the other quality dimension.