Monday, October 19, 2009
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.