Testing for Monopoly Power when Products are Differentiated in Quality

F.L. Verboven

    Research output: Working paperDiscussion paperOther research output

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    Abstract

    This paper proposes a reduced form approach toempirically identify the presence of monopoly power in oligopolies characterized by vertical product di erentia-tion. In a fairly general model I derive the reduced form pricing equation under the hypothesis that rms collude by maximizing their joint pro t. A central comparative statics result states that a product's price depends only on its own quality and not on the quality ofits competitors. I propose simple tests implied by this result, requiring data only on the prices and the physical characteristics of the products. The tests are applied to the market for spreadsheets inthe US (1986-1991) and to the market for `engine variants' in the 1990 French car market. The empirical results are promising, but also indicate the need for further generalizations of the model.
    Original languageEnglish
    PublisherCentER
    Volume1995-70
    Publication statusPublished - 1995

    Publication series

    NameCentER Discussion Paper
    Volume1995-70

    Fingerprint

    Monopoly power
    Testing
    Reduced form
    Empirical results
    Competitors
    Comparative statics
    Spreadsheet
    Car
    Pricing
    Oligopoly

    Cite this

    Verboven, F. L. (1995). Testing for Monopoly Power when Products are Differentiated in Quality. (CentER Discussion Paper; Vol. 1995-70). CentER.
    Verboven, F.L. / Testing for Monopoly Power when Products are Differentiated in Quality. CentER, 1995. (CentER Discussion Paper).
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    Verboven, FL 1995 'Testing for Monopoly Power when Products are Differentiated in Quality' CentER Discussion Paper, vol. 1995-70, CentER.

    Testing for Monopoly Power when Products are Differentiated in Quality. / Verboven, F.L.

    CentER, 1995. (CentER Discussion Paper; Vol. 1995-70).

    Research output: Working paperDiscussion paperOther research output

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    Verboven FL. Testing for Monopoly Power when Products are Differentiated in Quality. CentER. 1995. (CentER Discussion Paper).