The assessment of the way distributive shocks, such as increased polarization or higher inequality, affect vertically differentiated markets has been severely hampered by the standard reference to uniform distributions. In this paper we offer the first proof of existence of a subgame perfect Nash equilibrium in a vertically differentiated duopoly with uncovered market, for a large set of symmetric and asymmetric distributions of consumers, including, among others, all logconcave distributions. The proof relies on the ‘income share elasticity’ representation of the consumers’ density function. Some illustrative examples are also provided to assess the impact of distributive shocks on market equilibrium.

Vertical differentiation beyond the uniform distribution

Benassi, Corrado
;
2019

Abstract

The assessment of the way distributive shocks, such as increased polarization or higher inequality, affect vertically differentiated markets has been severely hampered by the standard reference to uniform distributions. In this paper we offer the first proof of existence of a subgame perfect Nash equilibrium in a vertically differentiated duopoly with uncovered market, for a large set of symmetric and asymmetric distributions of consumers, including, among others, all logconcave distributions. The proof relies on the ‘income share elasticity’ representation of the consumers’ density function. Some illustrative examples are also provided to assess the impact of distributive shocks on market equilibrium.
2019
Benassi, Corrado*; Chirco, Alessandra; Colombo, Caterina
File in questo prodotto:
File Dimensione Formato  
Vertical_Differentation.pdf

accesso aperto

Tipo: Postprint
Licenza: Licenza per accesso libero gratuito
Dimensione 511.21 kB
Formato Adobe PDF
511.21 kB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/666440
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 9
  • ???jsp.display-item.citation.isi??? 9
social impact