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Vertically Differentiated Mixed Oligopoly with Quality‐dependent Fixed Costs
Author(s) -
Lutz Stefan,
Pezzino Mario
Publication year - 2014
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12035
Subject(s) - oligopoly , duopoly , microeconomics , economics , quality (philosophy) , ranking (information retrieval) , competition (biology) , fixed cost , maximization , industrial organization , product differentiation , subsidy , social welfare , cournot competition , market economy , computer science , biology , ecology , philosophy , epistemology , machine learning , political science , law
The paper studies duopolistic competition when firms face fixed quality‐dependent costs of production and one of the two firms targets (at least in the long run) welfare maximization. We show that mixed oligopoly is in general socially desirable compared with a private duopoly regardless of the type of competition in the short run and the equilibrium quality ranking. In addition, the nationalization of one of the firms seems to be a more efficient regulatory instrument than the adoption of minimum quality standard or subsidization of the high‐quality provider.