Multiproduct firm behaviour in a differentiated market
AbstractIn this paper we offer a generalization of the circular model of product differentiation by introducing a multiproduct firm facing monoproduct competitors. We prove existence and explicitly characterize equilibrium when transportation costs are quadratic. We exhibit interesting equilibrium features for price policy, market shares, and profits. In equilibrium, the multiproduct firm uses its connected market shares to build asymmetric pricing schemes that allow a fraction of its product line (brands, stores or firms) to be shielded from outside competition and hence extracts maximum consumer surplus. Our results shed some light on the link between product differentiation and mergers and acquisitions activity (M&As).
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 36 (2003)
Issue (Month): 1 (February)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
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- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
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- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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