Dynamic entry in vertically differentiated markets

Abstract

We develop a model of vertical innovation in which firms incur a market entry cost and choose a unique level of quality. Once established, firms compete for market shares, selling to consumers with heterogeneous tastes for quality. The equilibrium of the pricing game exists and is unique within our setup. Exogenous productivity growth induces firms to enter… (More)
DOI: 10.1016/j.jet.2016.09.008

Topics

2 Figures and Tables