Seminário do CEG-IST

1 julho 2019, 16:58 - Fátima Jacinto

No âmbito do Ciclo de Seminários do CEG-IST temos o prazer de anunciar a realização do seguinte Seminário:

Data: 10 de julho 2019 (4ª feira) |  July 10th 2019

Hora: 14h30 | 2:30 pm

Local: Sala de Reuniões do DEG |  DEG Meeting Room

Palestrante: Prof.ª Margarida Catalão  | Speaker: Prof. Margarida Catalão

 

Titulo  |Title:  "Market coverage with quality dependent unit production costs"

 

Resumo | Abstract:

One aspect that has a great impact on consumers welfare is whether the whole market is served or not. If some consumers are not served, we may argue that the market outcome is not promoting social inclusion.

Consumers have different preferences regarding quality and hence different willingness to pay for it. Using a standard vertical differentiation model, this paper endogeneizes market coverage through competing firms’ quality choices in a two-stage game in which firms decide their price-quality mix. Most of the existing literature has ex ante assumed either full or partial coverage, which is misleading. The only exceptions consider higher fixed costs for higher quality offered, for instance through R&D investments, but this is too restrictive, since the quality choice also influences variable production costs (more expensive inputs and/or a more specialized labour force are usually required to produce higher quality). We admit the more realistic scenario of unit production costs increasing with quality and derive the subgame perfect Nash equilibria for the quality, price and coverage level choices. We show that either full or partial market coverage may arise in equilibrium, thus correcting and completing previous literature results. Partial coverage occurs for intermediate-low quality valuations. For very low or very high valuations of quality by the market, only one provider subsists in equilibrium, whereas market competition arises for intermediate quality valuations. Our results have important implications in terms of firms’ market positioning and innovation decisions.

 

Os Seminários do CEG-IST são de acesso livre.