Product Differentiation with Multiple Qualities

Abstract

We study subgame-perfect equilibria of the classical quality-price, multistage game of vertical product di¤erentiation. Each …rm 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 equilibrium e¤ects of qualities on the rival's price in the general model. We present necessary and su¢ cient conditions for equilibrium di¤erentiation in any of the qualities.

Assessing Higher Education Policy in Brazil: A Mixed Oligopoly Approach

“…Barigozzi and Ma (2018) propose a method to characterise equilibria in differentiated markets that solves the tractability-generality dilemma generally encountered in this literature.10 In the context of higher education, DelRey (2009) analyses, separately, two equilibria: one with higher (exogenous) public quality and one with lower (exogenous) public quality, and shows that public university fees can be welfare-enhancing when they induce the private university to increase enrolments.…”

Quality and competition between public and private firms

“…Also, the multiple-quality duopoly with general valuation distributions and cost functions inBarigozzi and Ma (2016) can generate a special case for the single-quality duopoly with ine¢ cient equilibrium qualities.…”