Abstract
This paper analyzes market versus optimal product varieties in a vertically differentiated goods monopoly. Four results are obtained. First, compared to the first- or second-best optimum, product varieties are always undersupplied by a monopolist. Second, the quality range under a monopoly is smaller than that under the first- or second-best optimum. Third, the monopolist distorts the lowest quality upward while distorting the highest quality downward. Finally, a fixed-cost subsidy can lead to a second-best outcome where a social planner determines the number of product varieties and the corresponding qualities, and the monopolist decides the prices.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: Journal of Institutional and Theoretical Economics
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
