| dc.description.abstract | What is the effect of competition on prices in a market where the product is offered
at different quality levels? Would the increase in competition reduce the price of
high quality good more than the low quality good? These are the questions examined
in this paper in the context of the video rental industry. Videos can be classified into
DVD and VHS. Firms can also be categorized as branded stores that belong to a major
chain and unbranded stores that do not belong to any major national chain. As
competition increases prices of both DVD and VHS should decrease, but in theory it is
not clear which one will decrease more. Moreover branded and unbranded stores
may respond differently to the change in competition. My empirical results indicate
that as competition increases, (a) for branded stores, the price of the high quality
good (DVD) falls more than that of the low quality good (VHS), (b) for unbranded
stores, we observe the opposite effect. | en_US |
