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The Logit as a Model of Product Differentiation

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  • Anderson, Simon P
  • De Palma, Andre

Abstract

The logit discrete choice model is argued to be flexible, tractable, and intuitively sound as a demand model of product differentiation under oligopoly. The free entry equilibrium product range is greater than or less than the social optimum, depending on cost and demand conditions and the degree of heterogeneity of consumer tastes. If the market provides "too many" products, then the difference between equilibrium and first-best optimal product diversity is negligible. However, when the market solution yields "too few" products, the market may seriously underprovide diversity. Copyright 1992 by Royal Economic Society.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 44 (1992)
Issue (Month): 1 (January)
Pages: 51-67

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Handle: RePEc:oup:oxecpp:v:44:y:1992:i:1:p:51-67

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Cited by:
  1. Andre dePalma & Karim Kilani, 2000. "The Optimal of Provision of Products with Income Effects," Econometric Society World Congress 2000 Contributed Papers 1299, Econometric Society.
  2. Arguedas, Carmen & Hamoudi, Hamid & Saez, Manuel, 2007. "Equilibrium Nonexistence in Spatial Competition with Quadratic Transportation Costs," Working Papers in Economic Theory 2007/01, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  3. Häckner, Jonas, 1999. "Market Delineation and Product Differentiation," Research Papers in Economics 1999:7, Stockholm University, Department of Economics.
  4. Sjaak Hurkens & Doh-Shin Jeon, 2009. "Mobile termination and mobile penetration," Economics Working Papers 1166, Department of Economics and Business, Universitat Pompeu Fabra.
  5. Rhee, Byong-Duk, 2006. "First-mover disadvantages with idiosyncratic consumer tastes along unobservable characteristics," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 99-117, January.
  6. Simon P. Anderston & Andre de Palma, 1991. "Multiproduct Firms: A Nested Logit Approach," Discussion Papers 973, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. repec:ebl:ecbull:v:4:y:2008:i:17:p:1-11 is not listed on IDEAS
  8. Hurkens, Sjaak & Jeon, Doh-Shin, 2012. "Promoting network competition by regulating termination charges," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 541-552.
  9. Damania, D., 1996. "The scope for collusion in a regulated vertically integrated telecommunications industry," Information Economics and Policy, Elsevier, vol. 8(2), pages 141-160, June.
  10. repec:ebl:ecbull:v:3:y:2007:i:30:p:1-15 is not listed on IDEAS
  11. Martin Richardson, 1998. "Foreign entry and domestic welfare," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(2), pages 250-262, June.
  12. Hurkens, Sjaak & Lopez, Angel, 2010. "Mobile termination, network externalities, and consumer expectations," IESE Research Papers D/850, IESE Business School.
  13. Sjaak Hurkens & Doh-Shin Jeon, 2008. "A Retail Benchmarking Approach to Efficient Two-Way Access Pricing: Termination-Based Price Discrimination with Elastic Subscription Demand," Working Papers 08-41, NET Institute, revised Nov 2008.
  14. Robert Somogyi & Janos Vincze, 2011. "Price Rigidity and Strategic Uncertainty An Agent-based Approach," IEHAS Discussion Papers 1135, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  15. Liao, Hao & Xiao, Rui & Chen, Duanbing & Medo, Matúš & Zhang, Yi-Cheng, 2014. "Firm competition in a probabilistic framework of consumer choice," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 400(C), pages 47-56.

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