X. Henry Wang and Bill Z. Wang

"Mixed-Strategy Equilibria in a Quality Differentiation Model"

JEL codes: C70; D40
Keywords: Quality-Price Game, Mixed-Strategy Equilibrium

Abstract: This paper shows that the standard quality-differentiation duopoly model has, in addition to the two already-found pure-strategy equilibria of maximum quality differentiation, three mixed-strategy equilibria which imply less than maximum quality differentiation. Furthermore, in a symmetric mixed-strategy equilibrium, same qualities are chosen with a probability greater than one half.