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| Author: | Wang, X. H. Yang, B. Z. |
| Title: | Mixed-strategy equilibria in a quality differentiation model |
| Journal: | International Journal of Industrial Organization
2001 : JAN, VOL. 19:1-2, p. 213-226 |
| Index terms: | QUALITY PRICES STRATEGY |
| Language: | eng |
| Abstract: | This paper shows that the standard quality-differentiation duopoly model has, in addition to the two well-known pure-strategy equilibria of maximum quality differentiation, an infinity of mixed-strategy equilibria in which firms choose mixed strategies in the first-stage quality game. In these equilibria, maximum quality differentiation does not occur due to coordination failure. Total expected consumer surplus is the same at all mixed-strategy equilibria and is higher than that under either pure-strategy equilibrium. Total expected industry profit is the same at all mixed- strategy equilibria and is lower than that under either pure-strategy equilibrium. |
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