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The multiproduct monopolist under vertical differentiation: An inductive approach

Published online by Cambridge University Press:  17 August 2016

Luca Lambertini
Luca Lambertini*
Affiliation:
Dipartimento di Scienze Economiche, Università degli Studi di Bologna
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Summary

An inductive procedure is adopted to evaluate the behaviour of a multiproduct profit seeking monopolist vis à vis that of a social planner, in a model where there is a continuum of consumers characterized by different marginal willingness to pay for quality. When the market is completely covered, the monopolist undersupplies all qualities as long as their number is finite. When quality becomes continuous, the richest consumer is provided with the socially optimal quality. Under the alternative assumption of partial market coverage, the monopolist supplies the same qualities as the social planner, restricting though total output. Finally, it turns out that, for a given number of varieties, under partial market coverage the monopolist can make at least as good as under full market coverage, so that she prefers to distort quantity rather than quality.

Résumé

Résumé

Dans un modèle avec un continuum de consommateurs caractérisé par leu dispositions a payer pour la qualité, une procédure inductive est adoptée afin de comparer le comportement d'un monopoleur multiproduit qui cherche a maximiser sont profit et celui d'un planificareur social. Quand le marché est complètement couvert, et tant que leur nombre de qualités est fini, le monopoleur offre toutes les qualités mais en quatité inférieur à celles requises par l'optimum social. Dans le cas où il y a un continu de qualités, le consommateur le plus riche achète la qualité socialement optimale. Si le marché n'est que partiellement couvert, bien que l'output soit sous-optimal, le monopoleur vend les mêmes qualités que celles du planificateur social. Finalement, si le marché ne sont que partiellement couvet, pour un nombre donné de variétés le monopoleur peut faire au moins aussi bien que si le marché est totalement couvert; ce dernier, afin de maximiser son profit, préférera jouer sur les quantités plutôt que sur les qualités.

Keywords

L12L12
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 63 , Issue 2 , 1997 , pp. 109 - 122
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1997 

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Footnotes

(*)

This paper draws on the first chapter of my DPhil dissertation at Linacre College, Oxford. I would like to thank Guido Candela, Norman Ireland, Paul Klemperer, Martin Slater and an anonymous referee for helpful comments and suggestions on a previous draft. The usual disclaimer obviously applies.

References

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