Oligopolistic Competition and the Optimal Provision of Products
AbstractThis paper reconsiders the theory of market versus optimal product diversity using a discrete choice approach to product differentiation. The authors analyze oligopoly with price competition and free entry with integer firm numbers. Under the Chamberlinian symmetry assumption, they show that log-concavity of the taste density function implies excessive market provision of diversity when each consumer buys one unit. This result is extended to price-sensitive individual demands by proving that the equilibrium number of firms exceeds that provided at the second-best optimum subject to zero profits. Copyright 1995 by The Econometric Society.
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Bibliographic InfoArticle provided by Econometric Society in its journal Econometrica.
Volume (Year): 63 (1995)
Issue (Month): 6 (November)
Other versions of this item:
- ANDERSON, Simon P. & DE PALMA, André & NESTEROV, Yurii, 1994. "Oligopolistic Competition and the Optimal Provision of Products," CORE Discussion Papers 1994034, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Anderson, S. P. & De Palma, A. & Nesterov, Y., . "Oligopolistic competition and the optimal provision of products," CORE Discussion Papers RP -1179, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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