A difficulty with the address models of product differentiation
AbstractIn models of product differentiation and location models it is implicitly assumed that consumers can afford to buy the differentiated goods in the market. I show that with income heterogeneity there are severe existence problems of a price equilibrium in models of horizontal product differentiation with unit demand because some consumers are income-constrained. The result generalizes to other models of product differentiation, search, and switching costs. I present an alternative specification of variable individual demand in which this kind of existence problem cannot arise.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 14 (1999)
Issue (Month): 3 ()
Note: Received: October 17, 1997; revised version: February 20, 1998
Contact details of provider:
Web page: http://link.springer.de/link/service/journals/00199/index.htm
Other versions of this item:
- 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).
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Economides, Nicholas, 1984. "The principle of minimum differentiation revisited," European Economic Review, Elsevier, vol. 24(3), pages 345-368, April.
- Martin Peitz, 1996.
"Differentiated bertrand duopoly with variable demand,"
Working Papers. Serie AD
1996-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Peitz, Martin, 1997. "Differentiated Bertrand duopoly with variable demand," Research in Economics, Elsevier, vol. 51(2), pages 85-100, June.
- CREMER, Helmuth & THISSE, Jacques-François, .
"Location models of horizontal differentiation: a special case of vertical differentiation models,"
CORE Discussion Papers RP
-931, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cremer, Helmuth & Thisse, Jacques-Francois, 1991. "Location Models of Horizontal Differentiation: A Special Case of Vertical Differentiation Models," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 383-90, June.
- d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979.
"On Hotelling's "Stability in Competition","
Econometric Society, vol. 47(5), pages 1145-50, September.
- Jaskold Gabszewicz, J. & Thisse, J. -F., 1979.
"Price competition, quality and income disparities,"
Journal of Economic Theory,
Elsevier, vol. 20(3), pages 340-359, June.
- Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
- Caplin, A. & Nalebuff, B., 1989.
"Aggregation And Imperfect Competition: On The Existence Of Equilibrium,"
1989_30, Columbia University, Department of Economics.
- Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
- 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.
- Martin Peitz, 1998. "- Two-Stage Models Of Product Differentiation With Unit-Elastic Demand," Working Papers. Serie AD 1998-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Bockem, Sabine, 1994. "A Generalized Model of Horizontal Product Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 287-98, September.
- Peitz, Martin, 1995. "Utility maximization in models of discrete choice," Economics Letters, Elsevier, vol. 49(1), pages 91-94, July.
- Peitz, Martin, 2000.
"Aggregation in a Model of Price Competition,"
Journal of Economic Theory,
Elsevier, vol. 90(1), pages 1-38, January.
- Pia Weiss, 2002.
"Product and Process Innovations in a Horizontally Differentiated Product Market,"
- Pia Weiß, 2001. "Product and Process Innovations in a Horizontally Differentiated Product Market," IWP Discussion Paper Series 07/2001, Institute for Economic Policy, Cologne, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.