Electronic Resource
Berkeley, Calif.
:
Berkeley Electronic Press (now: De Gruyter)
Topics in theoretical economics
6.2006, 1, art15
ISSN:
1534-598X
Source:
Berkeley Electronic Press Academic Journals
Topics:
Economics
Notes:
In this paper, we consider an incumbent firm facing potential entry in a vertical differentiation model a la Mussa and Rosen where consumers differ only by their intensity of preference for quality. We ask whether the incumbent firm has the incentive to adopt a multi-product strategy in order to face entry, in a natural duopoly case. It turns out that this strategy is never profitable and that an incumbent always prefers to produce one quality. It appears that either a cost effect or an income dispersion are necessary to urge producers to offer several products.
Type of Medium:
Electronic Resource
URL:
http://www.bepress.com/bejte/topics/vol6/iss1/art15
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