Nonlinear Pricing and Multimarket Duopolists

Silvia Sonderegger

The Centre for Market and Public Organisation from The Centre for Market and Public Organisation, University of Bristol, UK

Abstract: This paper studies competition in price-quality menus within the context of a horizontally differentiated duopoly, where each firm also operates in a local, monopolistic market. It is assumed that the consumer's unobservable valuation for quality is determined by the nature of his preferences over brand product characteristics. I show that if competition between the two firms is sufficiently fierce, the equilibrium contract features overprovision of quality for sufficiently low types. Thus, with respect to the monopoly setting, competition may introduce new types of distortions, namely upward distortions. This suggests that the relationship between 'toughness of competition' and welfare may not necessarily be monotonic.

Keywords: oligopoly; other forms of market imperfection (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004-10
New Economics Papers: this item is included in nep-com, nep-fin, nep-ind and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:bri:cmpowp:04/110

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