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Aggregation in a Model of Price Competition

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  • Peitz, Martin

Abstract

In a model of price competition single-product ¯rms compete for consumers. Consumerspurchase a variable quantity of one of the di®erentiated goods. The paper provides results onequilibrium existence when consumers are heterogeneous in their evaluation of the di®erentiatedgoods among each other, their evaluation of the di®erentiated goods relative to the outside good,and heterogeneous in income. Furthermore, I provide su±cient conditions for dominance solvabilityand monotone comparative statics.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 90 (2000)
Issue (Month): 1 (January)
Pages: 1-38

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Handle: RePEc:eee:jetheo:v:90:y:2000:i:1:p:1-38

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Web page: http://www.elsevier.com/locate/inca/622869

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  1. Caplin, A. & Nalebuff, B., 1989. "Aggregation And Social Choice: A Mean Voter Theorem," Discussion Papers 1989_31, Columbia University, Department of Economics.
  2. Egbert Dierker, 1989. "Competition for Customers," Discussion Paper Serie A 244, University of Bonn, Germany.
  3. ROBERTS, John & SONNENSCHEIN, Hugo, . "On the foundations of the theory of monopolistic competition," CORE Discussion Papers RP -296, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  5. D. B. Bernheim, 2010. "Rationalizable Strategic Behavior," Levine's Working Paper Archive 514, David K. Levine.
  6. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
  7. Dierker, Egbert & Dierker, Hildegard & Trockel, Walter, 1984. "Price-dispersed preferences and C1 mean demand," Journal of Mathematical Economics, Elsevier, vol. 13(1), pages 11-42, April.
  8. Tan, Tommy Chin-Chiu & da Costa Werlang, Sergio Ribeiro, 1988. "The Bayesian foundations of solution concepts of games," Journal of Economic Theory, Elsevier, vol. 45(2), pages 370-391, August.
  9. Andrew Caplin & Barry Nalebuff, 1990. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Cowles Foundation Discussion Papers 937, Cowles Foundation for Research in Economics, Yale University.
  10. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321.
  11. Grandmont, Jean-Michel, 1987. "Distributions of Preferences and the 'Law of Demand.'," Econometrica, Econometric Society, vol. 55(1), pages 155-61, January.
  12. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
  13. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
  14. Martin Peitz, 1998. "- A Difficulty With The Address Models Of Product Differentiation," Working Papers. Serie AD 1998-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  15. Milgrom, Paul & Roberts, John, 1991. "Adaptive and sophisticated learning in normal form games," Games and Economic Behavior, Elsevier, vol. 3(1), pages 82-100, February.
  16. Peitz, Martin, 1997. "Differentiated Bertrand duopoly with variable demand," Research in Economics, Elsevier, vol. 51(2), pages 85-100, June.
  17. Mas-Colell, Andreu & Neuefeind, Wilhelm, 1977. "Some Generic Properties of Aggregate Excess Demand and an Application," Econometrica, Econometric Society, vol. 45(3), pages 591-99, April.
  18. Grandmont, Jean-Michel, 1993. "Behavioural heterogeneity and Cournot oligopoly equilibrium," Ricerche Economiche, Elsevier, vol. 47(2), pages 167-187, June.
  19. Curtis Eaton, B. & Lipsey, Richard G., 1989. "Product differentiation," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 12, pages 723-768 Elsevier.
  20. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
  21. Paul Milgrom & John Roberts, 2010. "Adaptive and Sophisticated Learning in Repeated Normal-Form Games," Levine's Working Paper Archive 418, David K. Levine.
  22. Martin Peitz, 2002. "Price equilibrium in address models of product differentiation: unit-elastic demand," Economic Theory, Springer, vol. 20(4), pages 849-860.
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Cited by:
  1. Alexander Konovalov & Zsolt Sándor, 2010. "On price equilibrium with multi-product firms," Economic Theory, Springer, vol. 44(2), pages 271-292, August.
  2. Sándor, Z., 2004. "On price equilibrium with multi-product firms," Econometric Institute Research Papers EI 2004-50, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  3. AMIR, Rabah, 2003. "Supermodularity and complementarity in economics: an elementary survey," CORE Discussion Papers 2003104, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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