Vertical Differentiation and Labour in a General Equilibrium Model

Abstract

We consider a general equilibrium model with vertical preferences and a limited number of firms, where workers and consumers are differentiated respectively by their sensitivity to effort and their preference for quality. We compare the duopoly and the monopoly cases from the view point of each individual, then we deduce the choice of the majority. We prove that, in a concentrated-ownership society, the duopoly is always preferred by the majority, while in an egalitarian-ownership society, the choice of the majority depends on the size of workers and consumers segments.