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The Importance of the Distribution of Consumers in Horizontal Product Differentiation

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  • Calvó-Armengol, Antoni
  • Zenou, Yves

Abstract

This Paper examines the importance of the distribution of consumers in Hotelling's circle on the comparison between the optimal and the market equilibrium levels of diversity. It finds that when most consumers are located very close to the firms, the result of Salop that the equilibrium number of firms is larger than the optimal one (surplus maximizing) can be reversed.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3031.

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Date of creation: Oct 2001
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Handle: RePEc:cpr:ceprdp:3031

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Related research

Keywords: hotelling; market equilibrium; social optimism;

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References

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  1. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
  2. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  3. Jehiel, Philippe, 1992. "Product differentiation and price collusion," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 633-641, December.
  4. Bloch, Francis & Manceau, Delphine, 1999. "Persuasive advertising in Hotelling's model of product differentiation," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 557-574, May.
  5. Economides, Nicholas, 1984. "Do increases in preference similarity (across countries) induce increases in trade? : An affirmative example," Journal of International Economics, Elsevier, vol. 17(3-4), pages 375-381, November.
  6. Shilony, Yuval, 1981. "Hotelling's competition with general customer distributions," Economics Letters, Elsevier, vol. 8(1), pages 39-45.
  7. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9781107001411, October.
  8. Neven, Damien J., 1986. "On Hotelling's competition with non-uniform customer distributions," Economics Letters, Elsevier, vol. 21(2), pages 121-126.
  9. d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "On Hotelling's "Stability in competition"," CORE Discussion Papers RP -385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Kats, Amoz, 1995. "More on Hotelling's stability in competition," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 89-93, March.
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Citations

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Cited by:
  1. Gu Yiquan & Wenzel Tobias, 2012. "Price-Dependent Demand in Spatial Models," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-26, March.
  2. Torrisi, Gianpiero, 2008. "The model of the linear city under a triangular distribution of consumers: an empirical analysis on price and location of beverage kiosks in Catania," MPRA Paper 12694, University Library of Munich, Germany.
  3. Loertscher, Simon & Muehlheusser, Gerd, 2008. "Global and local players in a model of spatial competition," Economics Letters, Elsevier, vol. 98(1), pages 100-106, January.

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