[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/gam/jgames/v14y2023i4p56-d1217675.html
   My bibliography  Save this article

Duopoly and Endogenous Single Product Quality Strategies

Author

Listed:
  • Amit Gayer

    (Tel-Hai College, Qiryat Shemona 9977, Israel)

Abstract
This research paper investigates a duopolistic market characterized by vertical product differentiation. The study considers both product qualities and consumer preferences represented as one-dimensional intervals. The focus is on analyzing the equilibrium in a duopoly game with convex production costs. In this setting, each firm has the option to present a multi-product strategy consisting of quality–price pairs, and their profits are determined by the decisions made by consumers. The findings of the study reveal that, under typical consumer preference conditions, both firms tend to offer a single quality–price pair. Additionally, the market is shown to be fully served, and firm profits decrease as the index of product quality increases. A comparative analysis is also conducted with the case of a monopoly.

Suggested Citation

  • Amit Gayer, 2023. "Duopoly and Endogenous Single Product Quality Strategies," Games, MDPI, vol. 14(4), pages 1-11, August.
    • Handle: RePEc:gam:jgames:v:14:y:2023:i:4:p:56-:d:1217675
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2073-4336/14/4/56/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2073-4336/14/4/56/
    Download Restriction: no
    ---><---

    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.
    2. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-131, June.
    3. Yong-Hwan Noh & Giancarlo Moschini, 2006. "Vertical Product Differentiation, Entry-Deterrence Strategies, and Entry Qualities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(3), pages 227-252, November.
    4. 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.
    5. Jaskold Gabszewicz, Jean & Shaked, Avner & Sutton, John & Thisse, Jacques-Francois, 1986. "Segmenting the market: The monopolist's optimal product mix," Journal of Economic Theory, Elsevier, vol. 39(2), pages 273-289, August.
    6. Iwan Bos & Marco A. Marini, 2022. "Collusion in quality‐segmented markets," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(2), pages 293-323, April.
    7. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(1), pages 3-13.
    8. Cremer, Helmuth & Thisse, Jacques-Francois, 1994. "Commodity Taxation in a Differentiated Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 613-633, August.
    9. Cheng Yi-Ling & Peng Shin-Kun & Tabuchi Takatoshi, 2011. "Multiproduct Duopoly with Vertical Differentiation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-29, August.
    10. Bos, Iwan & Marini, Marco A. & Saulle, Riccardo D., 2020. "Cartel formation with quality differentiation," Mathematical Social Sciences, Elsevier, vol. 106(C), pages 36-50.
    11. Benjamin Scheibehenne & Rainer Greifeneder & Peter M. Todd, 2010. "Can There Ever Be Too Many Options? A Meta-Analytic Review of Choice Overload," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 37(3), pages 409-425, October.
    12. Basak Altan, 2020. "Dynamic Durable Goods Monopoly and Market Power," Games, MDPI, vol. 11(2), pages 1-14, May.
    13. A. Michael Spence, 1980. "Multi-Product Quantity-Dependent Prices and Profitability Constraints," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(5), pages 821-841.
    14. Phlips,Louis, 1983. "The Economics of Price Discrimination," Cambridge Books, Cambridge University Press, number 9780521283946, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Amit Gayer, 2024. "Monopoly and Quality Omission," Games, MDPI, vol. 15(6), pages 1-12, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Amit Gayer, 2024. "Monopoly and Quality Omission," Games, MDPI, vol. 15(6), pages 1-12, October.
    2. Peter-J. Jost, 2023. "Price commitment and the strategic launch of a fighter brand," Quantitative Marketing and Economics (QME), Springer, vol. 21(3), pages 381-435, September.
    3. Ya‐chin Wang & Leonard F.s. Wang, 2009. "Equivalence Of Competition Mode In A Vertically Differentiated Duopoly With Delegation," South African Journal of Economics, Economic Society of South Africa, vol. 77(4), pages 577-590, December.
    4. Bos, Iwan & Marini, Marco A. & Saulle, Riccardo D., 2020. "Cartel formation with quality differentiation," Mathematical Social Sciences, Elsevier, vol. 106(C), pages 36-50.
    5. Lutz, Stefan H., 2002. "The Effects of Quotas on Vertical Intra-Industry Trade," ZEW Discussion Papers 02-61, ZEW - Leibniz Centre for European Economic Research.
    6. Iwan Bos & Marco A. Marini, 2022. "Collusion in quality‐segmented markets," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(2), pages 293-323, April.
    7. Constantatos, Christos & Perrakis, Stylianos, 1995. "Différenciation verticale et structure du marché," L'Actualité Economique, Société Canadienne de Science Economique, vol. 71(1), pages 71-98, mars.
    8. Dorothée Brécard, 2011. "Environmental Tax in a Green Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(3), pages 387-403, July.
    9. De Fraja, Giovanni, 1996. "Product line competition in vertically differentiated markets," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 389-414, May.
    10. Sai Zhao & Lei Fang, 2023. "Debt financing, first‐mover advantage, and vertical product differentiation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 502-514, January.
    11. Yi-Ling Cheng & Shin-Kun Peng, 2012. "Quality and Quantity Competition in a Multiproduct Duopoly," Southern Economic Journal, John Wiley & Sons, vol. 79(1), pages 180-202, July.
    12. Brécard, Dorothée, 2010. "On production costs in vertical differentiation models," Economics Letters, Elsevier, vol. 109(3), pages 183-186, December.
    13. Roy Jones & Haim Mendelson, 2011. "Information Goods vs. Industrial Goods: Cost Structure and Competition," Management Science, INFORMS, vol. 57(1), pages 164-176, January.
    14. Bing Jing & Roy Radner, 2004. "Nonconvex Production Technology and Price Discrimination," Working Papers 04-04, New York University, Leonard N. Stern School of Business, Department of Economics.
    15. Chung, Hui-Ling & Chen, Hung-Yi & Hu, Jin-Li & Lin, Yan-Shu, 2014. "Bundling With Quality Choice," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 55(2), pages 147-165, December.
    16. José Luis Moraga Gonzales & Jean-Marie Viaene, 2001. "Trade and Industrial Policy of Transition Economies," CESifo Working Paper Series 446, CESifo.
    17. Gayer, Amit, 2017. "Endogenous duopolies," Economics Letters, Elsevier, vol. 159(C), pages 1-3.
    18. Balan, David J. & Deltas, George, 2013. "Better product at same cost, lower sales and lower welfare," International Journal of Industrial Organization, Elsevier, vol. 31(4), pages 322-330.
    19. Peter-J. Jost & Stefanie Schubert & Miriam Zschoche, 2015. "Incumbent positioning as a determinant of strategic response to entry," Small Business Economics, Springer, vol. 44(3), pages 577-596, March.
    20. José Luis Moraga Gonzales & Jean-Marie Viaene, 2001. "Procompetitive Trade Policies," CESifo Working Paper Series 597, CESifo.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jgames:v:14:y:2023:i:4:p:56-:d:1217675. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.