Endogenous quality choice: price vs. quantity competition

Article Abstract:

A two-stage game is presented with a vertical product differentiation model using fixed costs of quality and with variable costs of quality versions. Purpose of the exercise is examination of endogenous equilibrium qualities under proce and quantity competition. Price competition is seen to result in greater differentiation of equilibrium qualities than does quantity competition. A simple welfare measure indicates overall economic benefit is greater with price competition, a result that holds for either cost hypothesis.

Competition (Economics), Prices

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Evidence on agglomeration in quality space - revisited

Article Abstract:

Similar agglomeration patterns are found in an extension of the work of Hjorth-Andersen, in comparison of durable and non-durable goods, search and experience goods, and test organizations. Data sets of 16,257 products tested by the Austrian magazine 'Konsument' and the German magazine 'Test' are used to examine agglomeration patterns in quality space. Results indicate a tendency by manufacturers to provide consistent attribute qualities.

Product quality

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Quality choice in models of vertical differentiation

Article Abstract:

The complete characterization of quality choices in a duopoly model of vertical product differentiation is presented, where firms choose the quality of the product and then compete in prices. Market outcomes at the price stage are shown as endogenous outcomes of equilibrium quality choice. The distribution of consumers' tastes is considered as the decisive factor in product differentiation.

Analysis, Finance, Markets (Economics), Quality control, Business enterprises

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