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- Title
Quality Distortion by a Discriminating Monopolist: Comment.
- Authors
Donnenfeld, Shabtai; White, Lawrence J.
- Abstract
The article comments on quality distortion by a discriminating monopolist. The article also provides and discusses comparative statics results as well as some policy-related issues. A monopolist that offers multiple product quality levels to multiple consumer types may well find it worthwhile to distort some quality levels or not provide them at all. This distortion can enhance the monopolist's profits because it prevents or discourages some customer types, who have a high willingness to pay for some quality levels, from switching to other quality levels that yield lower profits for the monopolist. Some interesting results emerge from the comparative statics for the standard and non-standard cases. First, as the relative number of the high absolute willingness to pay consumers increases, the quality distortion experienced by the other group worsens. Second, changes in either group's absolute willingness to pay have no effects on quality distortion, though they do affect the location of the boundary solution and therefore, affect the likelihood that the monopolist will specialize on producing products only for one group. Microeconomic models involving endogenous quality continue to provide a rich vein for theoretical research and policy-oriented issues.
- Subjects
QUALITY; MONOPOLIES; CONSUMERS; WILLINGNESS to pay; CONSUMER behavior
- Publication
American Economic Review, 1990, Vol 80, Issue 4, p941
- ISSN
0002-8282
- Publication type
Article