Effects of technological progress on vertical product differentiation and welfare
研究了上游农业技术进步如何影响下游双寡头市场的纵向产品差异化，发现成本降低的创新会扩大质量差距，低质量企业质量大幅下降，但市场扩张效应使消费者受益。
We study the effects of technological progress in upstream agri-food markets on vertical differentiation in a downstream duopoly. The duopolists, who enjoy seller and buyer market power, transform homogeneous agricultural input into goods of varying qualities. We find that a cost-reducing innovation increases differentiation, and this differentiation comes from a sizable decrease in quality of the low-quality firm. The intensification of differentiation results in a market-expansion effect that largely benefits consumers. The distribution of benefits between upstream and downstream industries are consistent with the observation of a decreasing trend in farmers’ share of the retail food dollar.