Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Monday, October 19, 2009

On production costs in vertical differentiation models

Posted by D. Daniel Sokol


Dorothée Brécard (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes) has a new working paper On production costs in vertical differentiation models.

ABSTRACT: In this paper, we analyse the effects of the introduction of a unit production cost beside a fixed cost of quality improvement in a duopoly model of vertical product differentiation. Thanks to an original methodology, we show that a low unit cost tends to reduce product differentiation and thus prices, whereas a high unit cost leads to widen product differentiation and to increase prices.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/10/on-production-costs-in-vertical-differentiation-models.html

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