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Spatial Competition with Heterogeneous Firms

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  • Jonathan Vogel

Abstract

I model endogenous horizontal and vertical product differentiation with arbitrarily many heterogeneous firms. Firms are asymmetric in that they differ in their marginal costs. I prove that under an equilibrium refinement, all economically relevant firm outcomes are uniquely determined across all strict subgame perfect Nash equilibria. There are two central results. First, a firm's price, market share, and profit are independent of its neighbors' marginal costs, conditional on the average marginal cost in the market. Second, more productive firms are more isolated, all else equal. In particular, the distance between two firms is strictly decreasing in their average marginal cost. (c) 2008 by The University of Chicago. All rights reserved..

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 116 (2008)
Issue (Month): 3 (06)
Pages: 423-466

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Handle: RePEc:ucp:jpolec:v:116:y:2008:i:3:p:423-466

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Cited by:
  1. Kevin Wiseman, 2010. "Location, Productivity, and Trade," 2010 Meeting Papers 671, Society for Economic Dynamics.
  2. OKUBO, Toshihiro & PICARD, Pierre M. & THISSE, Jacques-François, . "The spatial selection of heterogeneous firms," CORE Discussion Papers RP -2257, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Marco Alderighi & Claudio A. Piga, 2009. "On cost restrictions in spatial competition models with heterogeneous firms," Discussion Paper Series 2009_09, Department of Economics, Loughborough University, revised Jul 2009.
  4. Mary Amiti & Amit K. Khandelwal, 2009. "Import Competition and Quality Upgrading," NBER Working Papers 15503, National Bureau of Economic Research, Inc.
  5. Helen Weeds, 2009. "Superstars and the Long Tail: The impact of technology on market structure in media industries," Economics Discussion Papers 669, University of Essex, Department of Economics.
  6. Emilie Dargaud & Carlo Reggiani, 2012. "On the Price Effects of Horizontal Mergers : A Theoretical Interpretation," Working Papers 1222, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  7. Narajabad, Borghan & Watson, Randal, 2011. "The dynamics of innovation and horizontal differentiation," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 825-842, June.
  8. Matthew Beacham, 2012. "The effect of Stackelberg cost reductions on spatial competition with heterogeneous firms," Discussion Papers 12/14, Department of Economics, University of York.
  9. Michele Boldrin & Juan C Allamand & David K Levine & Carmine Ornaghi, 2011. "Competition and Innovation," Levine's Working Paper Archive 786969000000000232, David K. Levine.
  10. DI COMITE, Francesco & THISSE , Jacques & ,, 2013. "Verti-zontal differentiation in export markets," CORE Discussion Papers 2013064, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Sylvain Champonnois, 2009. "Bank Competition and Economic Stability: The Role of Monetary Policy," 2009 Meeting Papers 1118, Society for Economic Dynamics.
  12. DeAngelo, Gregory, 2012. "Making space for crime: A spatial analysis of criminal competition," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 42-51.
  13. Meza, Sergio & Tombak, Mihkel, 2009. "Endogenous location leadership," International Journal of Industrial Organization, Elsevier, vol. 27(6), pages 687-707, November.
  14. Nathan H. Miller, 2008. "Competition When Consumers Value Firm Scope," EAG Discussions Papers 200807, Department of Justice, Antitrust Division.

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