Thursday, December 4, 2008
Posted by D. Daniel Sokol
Jean J. Gabszewicz (Université catholique de Louvain - Economics) and Joana Resende (Université catholique de Louvain - Economics) have a new paper out on Uncertainty Quality, Product Variety and Price Competition.
ABSTRACT: This paper analyses price competition under product differentiation when goods are defined in a two dimensional characteristic space, and consumers do not know which firm sells which quality. Equilibrium prices consist of two additive terms, which balance consumers' relative valuation of goods' expected quality and consumers' preferences for variety. However the relative importance of these terms differ under vertical and horizontal dominance.