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Market coverage and the nature of product differentiation : a note

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  • WAUTHY, Xavier

    ()
    (Facultés universitaires Saint-Louis, CEREC, Bruxelles, Belgium and Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

Abstract

In this note, we analyze the equilibrium outcomes of pricing games with product differentiation in relation with the extent of market coverage. It is a received idea in the IO literature that the horizontal and vertical models of product differentiation are almost formally equivalent. We show that this idea turns out to be wrong when the full market coverage assumption is relaxed. We then argue that there exist two fundamentally different classes of address-models of differentiation, although their difference is not perfectly captured by the standard horizontal/vertical typology

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2009081.

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Date of creation: 01 Dec 2009
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Handle: RePEc:cor:louvco:2009081

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Keywords: price competition; product differentiation;

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  1. Schmidt, Robert C., 2009. "Welfare in differentiated oligopolies with more than two firms," International Journal of Industrial Organization, Elsevier, vol. 27(4), pages 501-507, July.
  2. Andreas IRMEN & Jean-François THISSE, 1996. "Competition in Multi-Characteristics Spaces: Hotelling Was Almost Right," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9613, Université de Lausanne, Faculté des HEC, DEEP.
  3. GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "On the nature of competition with differentiated products," CORE Discussion Papers RP -685, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-83, September.
  5. 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.
  6. 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).
  7. BOCCARD, Nicolas & WAUTHY, Xavier Y., . "Equilibrium vertical differentiation in a Bertrand model with capacity precommitment," CORE Discussion Papers RP -2246, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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