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Productive efficiency and quality competition
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Autores
Orientador(es)
Resumo(s)
The existing literature on quality competition (namely Shaked and Sutton,1983) assumes that the existence of vertical "product differentiation in equilibrium IS dependent on a technological lead by the high quality firms, so that the unit variable cost of the firm increases "only modestly" with quality. By using Launhardt's (1885) model which is updated by Dos Santos Ferreira and Thisse (1992) and Dos Santos Ferreira and Zuscovitch (1995), we show the necessity and sufficiency of this condition for a duopoly with pure vertical product differentiation. If this condition is not met, the asymmetric quality equilibrium vanishes and all equilibria entail identical qualities with Bertrand prices, so that only the low cost firm IS active in equilibrium. The length of the set of symmetric equilibria increases with the degree of cost asymmetry. Then, assuming that vertical and horizontal differentiation are combined (as Launhardt' s model assumes that the preference of a consumer for quality is directly linked with the distance to the firm), the dependence of quality differentiation with technological leadership is still stronger. An asymmetric quality equilibrium exists if and only if the unit variable cost of the top quality firm is strictly lower than the competitors's and this difference should be "high enough". Otherwise the firms selects an identical bottom quality level in equilibrium.
Descrição
Palavras-chave
Leadership Technological Advance Oligopoly Quality Competitiveness Equilibrium Model
Contexto Educativo
Citação
Pontes, José Pedro. (1996). " Productive efficiency and quality competition". Instituto Superior de Economia e Gestão - DE Working papers nº 4 -1996/DE
Editora
ISEG - Departamento de Economia