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The implications of mandatory low-cost fuel provision
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| 458.35 KB | Adobe PDF | |||
| 458.35 KB | Adobe PDF |
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Resumo(s)
This work studies fuel retail firms’ strategic behavior in a two-dimensional product differentiation framework. Following the mandatory provision of “low-cost” fuel we consider that capacity constraints force firms to eliminate of one the previously offered qualities. Firms play a two-stage game choosing fuel qualities from three possibilities (low-cost, medium quality and high quality fuel) and then prices having exogenous opposite locations. In the highest level of consumers’ heterogeneity, a subgame perfect Nash equilibrium exists in which firms both choose minimum quality differentiation. Consumers’ are worse off if no differentiation occurs in medium and high qualities. The effect over prices from the mandatory “low-cost” fuel law is ambiguous.
Descrição
Palavras-chave
Two-dimensional product differentiation Heterogeneous quality preferences Low-cost fuel Mandatory provision