Rochet-Villa Model

The Rochet-Villa model is an economic framework used to analyze how pricing strategies affect competition in markets where firms can set both prices and product quality. It highlights the trade-offs businesses face between attracting customers with lower prices and maintaining profitability through higher quality offerings. The model illustrates that firms must carefully consider their pricing structures to balance consumer preferences and market dynamics, ultimately shaping the competitive landscape. This approach is particularly relevant in industries like telecommunications or services, where firms strive to differentiate themselves while managing costs effectively.