Regulation of a vertically differentiated duopoly
Author
Sand, Jan YngveAbstract
This paper focuses on the optimal quality regulation of vertically differentiated
duopolies in the presence of asymmetric information. In the model
presented there are cross-effects on the information rent. Contrary to standard
single-agent models, the production levels are distorted in favour of the most
efficient firm, whose production level is increased under asymmetric information
relative to full information. The first-best outcomes can only be achieved
if both firms are of the most efficient types. The optimal degree of vertical
differentiation is also discussed. Furthermore, some extensions to the model
are examined (the presence of cost complementarity, quality as complements
etc.).
Publisher
Universitetet i TromsøUniversity of Tromsø
Series
Working paper series in economics and management, 2003, nr 7Metadata
Show full item recordCollections
The following license file are associated with this item: