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http://hdl.handle.net/2451/26265
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| Title: | Quality Choice and Vertical Integration |
| Authors: | Economides, Nicholas |
| Keywords: | Quality
Duopoly
Vertical integration |
| Issue Date: | 29-Oct-1997 |
| Series/Report no.: | EC-94-22 |
| Abstract: | We show that, despite coordination in the quality level of the
components that they provide, independent vertically-related
(disintegrated) monopolists will provide products of lower quality level
than a sole integrated monopolist. Further, the integrated monopolist
achieves higher market coverage, higher consumer surplus, and higher
profits.We establish these results for any distribution of preferences
in the standard model of quality differentiation. Despite the lower
quality, we also show that, for a wide class of cost functions, price
will be higher in a market of independent vertically-related
monopolists. All results are the effects of the interaction of
double-marginalization, occurring in the market of independent
monopolists, with the choice of quality. Ó 1999 Elsevier Science
B.V. All rights reserved. |
| URI: | http://hdl.handle.net/2451/26265 |
| Appears in Collections: | Economics Working Papers
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