Spillover Effects,Income Distribution And Product Quality Selection

There are income distribution gaps in different regions of China,and the quality of products also varies.The quality of products in developed areas is higher than it is in underdeveloped areas.So,what are the causes of product quality differences? How should manufacturers choose the best quality of products in different regions? Based on the oligopoly model,after giving the condition of income distribution in two areas,we introduce the spillover effect.The optimal product quality is obtained in different regions,and then we discuss the social welfare situation on the basis of policy simulation.First of all,manufacturers sell high-quality products in the local market.In order to gain competitive advantage,they open up emerging markets.Generally speaking,the level of economic development in emerging areas is not high.The most obvious feature of the two regions is that,the income distribution of consumers in developed areas is relatively average,but the income distribution of consumers in emerging regions is unequal.Manufacturers will accumulate advanced production experience in the production of high quality products,due to the presence of spillover effect,manufacturers will gain a cost advantage in emerging regions,we believe that the low quality products in emerging regions is caused by the uneven distribution of income.Under the premise of theoretical research,this paper determines the optimal product quality through the simulation of the specific value of the overflow parameters.The results show that,as the spillover effect increases,the differences of product quality between the two regions will be expanded,the total profits of manufacturers will increase,and the social welfare in the emerging areas will also increase at the same time.The main conclusions are as follows: first,under a certain spillover parameters conditions,the higher the manufacturers in the developed regions produce the quality of products,the lower will be the quality sold in less developed areas,and the size of the market will be grater;Second,with the increase of spillover parameter,the product quality in developed areas will be higher,market size will be smaller,on the contrary,the quality sold in less developed areas will be lower,and the size of the market will be greater;Third,the total profit of firm will increase as the spillover parameter increase.The innovation of the thesis mainly reflects in the following two aspects: On the one hand,the studies of monopoly firms on how to choose product qualitywith vertical differences in qualities are basically assume that the consumer's income is evenly distributed,this paper is based on the social reality,we assume that the consumer's income distribution is different.On the other hand,some studies do not consider the direct investment in developed areas to underdeveloped areas will bring spillover effect,but this is the manufacturers' own production experience transferfrom the developed areas to the underdeveloped areas,so there is a positive spillover effect.