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Product Differentiation and Market Power

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Author Info

  • Dierker, E.
  • Dierker, H.

Abstract

Assuming asymmetry across firms and constant unit costs Perloff and Salop (1985) show: If product differentiation increases, the prices rise in a symmetric equilibrium. This raise the question of whether, in general, more product differentiation leads to higher market prices. Giving up the symmetry and the constant unit costs assumptions we present examples in which at least one firm lowers its equilibrium price when product differentiation increases. We formulate a model of product differentiation and state and discuss, within the theory of supermodular games, conditions ensuring that all firms raise their prices in a Nash equilibrium if product differentiation increases.

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Bibliographic Info

Paper provided by Washington St. Louis - School of Business and Political Economy in its series Papers with number 9804.

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Length: 31 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:fth:waslbp:9804

Contact details of provider:
Postal: WASHINGTON UNIVERSITY IN ST-LOUIS, SCHOOL OF BUSINESS AND CENTER IN POLITICAL ECONOMY, ST-LOUIS MISSOURI 63130 U.S.A.
Web page: http://www.olin.wustl.edu/
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Keywords: ENTERPRISES ; PRICES ; PRODUCTS;

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Cited by:
  1. Ward, Michael B. & Shimshack, Jay P. & Perloff, Jeffrey M. & Harris, J. Michael, 2002. "Effects of the private-label invasion in food industries," MPRA Paper 22186, University Library of Munich, Germany.
  2. Luis C. Corchon & Clara Eugenia Garcia, 2005. "Technology Transfer In Oligopolistic Markets With Heterogeneous Goods," Economics Working Papers we057036, Universidad Carlos III, Departamento de Economía.
  3. Martin Peitz, 1998. "- Consumer Heterogeneity And Market Imperfections," Working Papers. Serie AD 1998-16, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  4. Richards, Timothy J. & Hamilton, Stephen F. & Patterson, Paul M., 2010. "Spatial Competition and Private Labels," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(2), August.
  5. Hoernig, Steffen H., 2003. "Existence of equilibrium and comparative statics in differentiated goods Cournot oligopolies," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 989-1019, September.

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