Differentiated Product Oligopoly. Product Characteristics. Goods characterization revisited: Goods are never perfect substitutes Distinguishing features = Product Characteristics Chamberlin/Lancaster approach: Model a good as a bundle of characteristics: Models:
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then the monopolist will charge p= and produce only high quality.
If buyers must choose to become informed and becoming informed is costly, there may be incentives to “free ride” on the information externality embodied in the price signal. But if everyone chooses not to be come informed, the externality disappears.
Here, sa is the value of s that Friday anticipates getting.
where Di is the demand firm i is facing.