Although naive intuition may indicate the opposite, the existing literature suggests that uncertainty about costs in the homogeneous-good Bertrand model intensifies competition: it lowers price and raises total surplus (but also makes profits go up). Those results, however, are derived under two...

In a model of vertical differentiation, the principal concern of this paper is to identify sufficient conditions for producing a higher- or lower-quality good to be more profitable (in terms of profits and profit margin). Our basic model considers a scenario where the firms' quality levels are...