On the theory of quality competition in differentiated markets: Multi-stage competitive analysis for the effects of quality competition on industrial market structure, spatial product differentiation, endogenous location, and the dynamics of technologica

The research work undertaken in this dissertation is in the area of theoretical models of quality competition in differentiated markets. Research on product differentiation models by quality choice is surveyed and different gaps in the literature are outlined for a research agenda. Four articles as independent research theses on the theory of quality competition in differentiated markets have been developed and analyzed. In the first article, the impact of quality competition and degree of asymmetric quality differentiation between firms on market saturation and industry concentration is investigated within an oligopoly market framework with sequential entry accommodation, and different conditions found necessary for a more competitive, less competitive, and "technology-neutral" market structure. In the second article, spatial quality choice is introduced as an integrative differentiation model where consumers are horizontally differentiated by taste while firms are vertically differentiated by quality location. Through monopolistic brand-space inequality conditions, spatial quality choice yields a resistance to change argument on the part of vertically located firms such that firms dislike quality re-location and prefer stable preferences in quality. Under more strict inequality conditions, it is found that firms are forced to vertically re-locate their product offerings to match horizontal demand even though the resistance to change argument may still hold good. In the third article, the issue of differentiated firms competing in both prices (short term) and quantities (long term) is investigated for a three-stage model where firms first choose quality location, followed by choice of fixed capacity levels, followed by competition in prices, with quality choice endogenous in the model. A Bertrand-Nash equilibrium with fixed Cournot quantities is achieved with differentiation and output asymmetries leading towards non-covered market demand. In the fourth article, the impact of circular quality differentiation on the dynamics of sigmoid technological diffusion with brand proliferation within a multi-brand market setting is addressed. The endogenous number of brands is found to greatly affect the speed of diffusion, and the dynamic interaction between different supply and demand factors is found to influence the extent and timing of full market satiation with technological adoption constrained by a minimum profitability condition for product innovation.