Welfare Effects of Product Differentiation with Demand Expansion
-
글쓴이
정회상 2026-10-22
-
강원대학교 경영경제연구소 아태비즈니스연구 게재
저자: 정회상
▶ 초록
Purpose - This study examines the welfare effects of product differentiation when it can expand market demand. In particular, it identifies how these effects depend on the magnitude of the demand expansion effect, the mode of competition, and the number of firms. Design/methodology/approach - This study develops a differentiated oligopoly model with a linear demand system that parameterizes the magnitude of the demand expansion effect of product differentiation. The model nests the Dixit–Singh–Vives and Shubik–Levitan demand systems as special cases. The welfare effects of product differentiation are analyzed under both Cournot and Bertrand competition. Findings - Under Cournot competition, product differentiation increases (reduces) consumer surplus when the demand expansion effect is sufficiently large (small). Under Bertrand competition, product differentiation increases consumer surplus when both the demand expansion effect and the number of firms are sufficiently large, and reduces it otherwise. Under both Cournot and Bertrand competition, product differentiation increases (reduces) social welfare when the demand expansion effect is sufficiently large (small). Research implications or Originality - This study shows that the welfare effects of product differentiation depend on the extent to which product differentiation expands market demand. By explicitly incorporating the demand expansion effect, the analysis provides a unified explanation for the contrasting welfare implications of two widely used demand systems. It also suggests that the demand expansion effect should be taken into account when product differentiation is interpreted as a measure of competitive pressure.
▶ 주제어: Product Differentiation, Demand Expansion Effect, Oligopoly, Welfare