Consumers face higher prices as brand loyalty boosts profits for duopoly firms.
The article explores how companies compete in pricing for different types of products. They found that when products are more different from each other, prices go up. Also, if more customers are loyal to a specific brand, prices increase too. The quality difference between products affects prices and profits, with larger differences leading to higher profits. When pricing decisions are made separately for each product, prices and profits are lower compared to when decisions are centralized. In this case, demand for the standard product is higher when quality differences are significant. Overall, decentralized pricing leads to lower welfare for consumers.