ECO Seminar/Webinar – Sílvia Jorge

october, 2021

26oct13:0014:00ECO Seminar/Webinar - Sílvia Jorge

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Event Details

CEF.UP – ECO Seminar/Webinar

Tuesday – October 26th, 2021 1:00 p.m. | Room 305 | Online

 

“Endogenous Market Coverage with Quality Dependent Unit Production Costs”

 

Sílvia Jorge – Universidade de Aveiro (joint work with Joana Pinho, Margarida Catalão-Lopes, Cesaltina Pacheco Pires, Pedro Garcês and Adriana Alventosa)

 

 

Abstract

“This paper endogeneizes the level of market coverage through competing firms’ choices in a vertically differentiated market, using a two-stage imperfect information game in which firms decide their quality-price mix. Most of the existing literature has ex-ante assumed either full or partial coverage, which is misleading. The only exceptions consider nil costs or higher fixed costs for higher quality offered, which is too restrictive since the quality choice also influences variable production costs. We set up a more realistic scenario of unit production costs increasing with quality and derive the subgame perfect Nash equilibria in terms of quality, price and coverage level. We show that either full or partial market coverage may arise in equilibrium. Partial coverage occurs when the level of the lowest valuation consumer is low. When the level is intermediate or high, full coverage subsists in equilibrium, with positive or nil surplus for the lowest valuation consumer (full coverage corner solution). Our results have important implications in terms of firms´ market positioning and pricing decisions, presenting a deeper and complete endogenous market coverage equilibrium analysis.”

 

Time

(Tuesday) 13:00 - 14:00

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