Testing for 'Monopoly' Market Power When Products Are Differentiated in Quality.
This paper proposes a reduced form approach to identify the presence of "monopoly" market power in markets with vertical product differentiation. In a general model I derive an explicit solution for the reduced form pricing equations under the hypothesis that prices are set to maximize the joint profits of all products. The central comparative statics result states that each product's price depends only on its own quality and not on the quality of its competitors. This contrasts with the solution under Bertrand-Nash behaviour and thus provides an identification argument for conduct under vertical product differentiation. I propose empirical tests implied by this result. They require only the data used in popular hedonic studies (prices and physical characteristics). The tests are applied to the US market for spreadsheets and to the French market for optional car engines. Copyright 2002 by Blackwell Publishers Ltd and The Victoria University of Manchester
Year of publication: |
2002
|
---|---|
Authors: | Verboven, Frank |
Published in: |
Manchester School. - School of Economics, ISSN 1463-6786. - Vol. 70.2002, 1, p. 115-33
|
Publisher: |
School of Economics |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Price squeezes in a regulatory environment
BOUCKAERT, Jan, (2003)
-
Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market
Goldberg, Pinelopi, (2001)
-
Röller, Lars-Hendrik, (2000)
- More ...