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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. Grandmont, Jean-Michel, 1987. "Distributions of Preferences and the 'Law of Demand.'," Econometrica, Econometric Society, vol. 55(1), pages 155-61, January.
  2. Werlang, Sérgio Ribeiro da Costa & Chin-Chiu Tan, Tommy, 1987. "The Bayesian Foundations of Solution Concepts of Games," Economics Working Papers (Ensaios Economicos da EPGE) 111, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  3. Egbert Dierker, 1989. "Competition for Customers," Discussion Paper Serie A 244, University of Bonn, Germany.
  4. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
  5. 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.
  6. Caplin, A. & Nalebuff, B., 1989. "Aggregation And Imperfect Competition: On The Existence Of Equilibrium," Discussion Papers 1989_30, Columbia University, Department of Economics.
  7. Martin Peitz, 1999. "A difficulty with the address models of product differentiation," Economic Theory, Springer, vol. 14(3), pages 717-727.
  8. Vives, X., 1988. "Nash Equilibrium With Strategic Complementarities," UFAE and IAE Working Papers 107-88, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  9. Jean-Michel Grandmont, 1993. "Behavioral Heterogeneity and Cournot Oligopoly Equilibrium," Cowles Foundation Discussion Papers 1044, Cowles Foundation for Research in Economics, Yale University.
  10. D. B. Bernheim, 2010. "Rationalizable Strategic Behavior," Levine's Working Paper Archive 514, David K. Levine.
  11. 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).
  12. Martin Peitz, 2002. "Price equilibrium in address models of product differentiation: unit-elastic demand," Economic Theory, Springer, vol. 20(4), pages 849-860.
  13. 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.
  14. 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.
  15. 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.
  16. Paul Milgrom & John Roberts, 2010. "Adaptive and Sophisticated Learning in Repeated Normal-Form Games," Levine's Working Paper Archive 418, David K. Levine.
  17. Peitz, Martin, 1997. "Differentiated Bertrand duopoly with variable demand," Research in Economics, Elsevier, vol. 51(2), pages 85-100, June.
  18. 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.
  19. 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.
  20. Caplin, A. & Nalebuff, B., 1989. "Aggregation And Social Choice: A Mean Voter Theorem," Discussion Papers 1989_31, Columbia University, Department of Economics.
  21. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-28, June.
  22. 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.
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Cited by:
  1. 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.
  2. Alexander Konovalov & Zsolt Sándor, 2010. "On price equilibrium with multi-product firms," Economic Theory, Springer, vol. 44(2), pages 271-292, August.
  3. Rabah Amir, 2005. "Supermodularity and Complementarity in Economics: An Elementary Survey," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 636-660, January.

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