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EQUIVALENCE OF COMPETITION MODE IN A VERTICALLY DIFFERENTIATED DUOPOLY WITH DELEGATION
Author(s) -
Wang Yachin,
Wang Leonard F.s.
Publication year - 2009
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/j.1813-6982.2009.01225.x
Subject(s) - product differentiation , duopoly , delegation , microeconomics , equivalence (formal languages) , quality (philosophy) , cournot competition , industrial organization , product (mathematics) , competition (biology) , economics , business , mathematics , discrete mathematics , physics , management , ecology , quantum mechanics , geometry , biology
This paper aims to examine the equivalence of competition mode in a vertically differentiated product market with the relative performance delegation. It demonstrates the equivalence of product quality and social welfare in this delegation game, irrespective of modes of product competition. In addition, in a three‐stage game of quality‐delegation‐quantity (or price), it shows that the delegation coefficient is different between high‐quality and low‐quality firms in an asymmetric vertical differentiated model, and a high‐quality firm makes better use of the delegation than a low‐quality firm.