This paper considers a vertical differentiation model with positive network effects. It is based on the assumption that consumers belong to the same network if they buy products exhibiting close characteristics. Thus, the network has two characteristics: its intensity and its selectivity. The higher the network intensity, the more positively affected the consumer is by the network size. The network selectivity corresponds to how close the products' characteristics should be to be perceived by consumers as compatible. The closer two compatible products are in the product space, the more selective the network.We analyze the strategic behavior in terms of prices and qualities of two firms: an incumbent and a potential entrant. By choosing its quality the entrant chooses at the same time to be compatible or not.We show that if the network intensity is moderate, it is always profitable for the entrant to enter the market. In this case the entrant is compatible with the incumbent when the network is not very selective and is incompatible when the network is selective. If the network intensity is strong, we prove that it acts as a barrier to entry under incompatibility. The equilibrium outcomes in this case are either no entry or compatible.
This note considers a general equilibrium model where individuals are potentially consumers, workers, and shareholders. It extends the results obtained previously by Kahloul et al. (2017) with extreme ownership structures on the majority vote between Monopoly and Duopoly, to the case of any proportion of shareholders in the population.We prove that Duopoly is preferred when non-shareholders constitute a majority of the population. Otherwise, the majority vote depends on the proportion of shareholders and the dispersion of the individuals with respect to their intensity of preference for quality relative to their sensitivity to effort.
We study in this paper the effect of the type of information provided by an ecolabel. For this purpose, in the framework of a model of vertical differentiation, we compare the effects of a partial information label (Type I) and a complete information label (Type III) on firms' profits, industry profit, consumers' surplus, environmental damage and social welfare. A partial information label indicates that the environmental quality of a good exceeds some given threshold. The authority issuing a partial information label chooses its labeling criteria while maximizing the social welfare. A complete information label indicates the exact environmental quality chosen by firms. We prove that while a partial information label always improves the social welfare and deteriorates the green firm profit compared to a complete information label, the comparison between the two types of ecolabel in terms of the brown firm's profit, the industry's profit, the consumers surplus and the environment depend in a non-obvious way on the marginal cost of quality and on the environmental sensitivity to quality.
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