A BEJTE Contributions article.

Abstract

This paper investigates an oligopolistic market with vertical product differentiation, where qualities are represented by a uni-dimensional interval. We examine the Nash equilibrium in the oligopoly game with a finite number of consumers, where each firm uses its technology and can offer a range of quality-price pairs, and firms' profits are determined by the consumers' selection choice. We show that under the standard conditions on consumers' preferences at most one firm with a positive profit can be active in equilibrium. In contrast, we present an example of a duopoly game with a continuum of consumers, in which both firms yield positive profits in an equilibrium. Finally, we analyze in the linear case the question of existence.

Submitted: March 7, 2007 · Accepted: July 25, 2007 · Published: August 30, 2007

Recommended Citation

Gayer, Amit (2007) "Oligopoly, Endogenous Monopolist and Product Quality," The B.E. Journal of Theoretical Economics: Vol. 7 : Iss. 1 (Contributions), Article 31.
Available at: http://www.bepress.com/bejte/vol7/iss1/art31