Abstract. The paper analyses the effects of income concentration on the behaviour of a duopoly with vertical product differentiation and uncovered market. By using a trapezoid distribution, we solve explicitly for market equilibrium as a function of a mean preserving spread of the income distribution. We show that overall more concentrated incomes imply stronger product differentiation, as the presence of a large share of middle-income consumers stimulates a price competition, whose effects are dampened through an enlargement of the quality spread. While the high-quality advantage and market coverage increase unambiguously in the degree of income concentration, the behaviour of prices is non-monotone in the distribution parameter.
Titolo: | Vertical Differentiation and the Distribution of Income |
Autori: | |
Data di pubblicazione: | 2006 |
Rivista: | |
Abstract: | Abstract. The paper analyses the effects of income concentration on the behaviour of a duopoly with vertical product differentiation and uncovered market. By using a trapezoid distribution, we solve explicitly for market equilibrium as a function of a mean preserving spread of the income distribution. We show that overall more concentrated incomes imply stronger product differentiation, as the presence of a large share of middle-income consumers stimulates a price competition, whose effects are dampened through an enlargement of the quality spread. While the high-quality advantage and market coverage increase unambiguously in the degree of income concentration, the behaviour of prices is non-monotone in the distribution parameter. |
Handle: | http://hdl.handle.net/11587/105613 |
Appare nelle tipologie: | Articolo pubblicato su Rivista |