IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-00242963.html
   My bibliography  Save this paper

Product differentiation when consumers may choose not to buy: Hotelling's convergence result revisited

Author

Listed:
  • Karine van Der Straeten

    (PSE - La plante et son environnement - INRA - Institut National de la Recherche Agronomique - UP11 - Université Paris-Sud - Paris 11 - INA P-G - Institut National Agronomique Paris-Grignon - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper studies Hotelling's spatial competition between two firms, but rather than assuming that consumers are ready to buy the good whatever the locations of the firms are, it is assumed here that there is an upper limit (possibly infinite) to the distance a consumer is ready to cover to buy the good. Under this slight generalization of Hotelling's assumptions, Hotelling's ``minimal differentiation principle'' does not hold in general. At equilibrium, firms choose ``minimal'', ``intermediate'' or ``complete'' differentiation, depending on this critical distance a consumer is ready to cover and on the shape of the distribution of consumers' locations.

Suggested Citation

  • Karine van Der Straeten, 2005. "Product differentiation when consumers may choose not to buy: Hotelling's convergence result revisited," Working Papers hal-00242963, HAL.
    • Handle: RePEc:hal:wpaper:hal-00242963
    Note: View the original document on HAL open archive server: https://hal.science/hal-00242963
    as

    Download full text from publisher

    File URL: https://hal.science/hal-00242963/document
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Osborne, Martin J & Pitchik, Carolyn, 1987. "Equilibrium in Hotelling's Model of Spatial Competition," Econometrica, Econometric Society, vol. 55(4), pages 911-922, July.
    2. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    3. Economides, Nicholas, 1986. "Minimal and maximal product differentiation in Hotelling's duopoly," Economics Letters, Elsevier, vol. 21(1), pages 67-71.
    4. Unknown, 1986. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 1(4), pages 1-9.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luca Lambertini & Raimondello Orsini, 2005. "The Existence Of Equilibrium In A Differentiated Duopoly With Network Externalities," The Japanese Economic Review, Japanese Economic Association, vol. 56(1), pages 55-66, March.
    2. Krol Michal, 2011. "On the Existence and Social Optimality of Equilibria in a Hotelling Game with Uncertain Demand and Linear-Quadratic Costs," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-22, March.
    3. Król, Michał, 2012. "Product differentiation decisions under ambiguous consumer demand and pessimistic expectations," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 593-604.
    4. Alain Egli, 2005. "Hotelling's Beach with Linear and Quadratic Transportation Costs: Existence of Pure Strategy Equilibria," Diskussionsschriften dp0509, Universitaet Bern, Departement Volkswirtschaft.
    5. Ralph Braid, 2014. "The socially optimal and equilibrium locations of two stores or libraries with consumer search," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 123-136, August.
    6. Giat, Yahel, 2019. "A location model for boycotting with an application to kosher certification," European Journal of Operational Research, Elsevier, vol. 273(3), pages 1109-1118.
    7. Chen, Chin-Sheng & Lai, Fu-Chuan, 2008. "Location choice and optimal zoning under Cournot competition," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 119-126, March.
    8. Hinloopen, Jeroen & Müller, Wieland & Normann, Hans-Theo, 2014. "Output commitment through product bundling: Experimental evidence," European Economic Review, Elsevier, vol. 65(C), pages 164-180.
    9. Auer, Raphael A. & Sauré, Philip, 2017. "Dynamic entry in vertically differentiated markets," Journal of Economic Theory, Elsevier, vol. 167(C), pages 177-205.
    10. L. Lambertini, 2001. "Dynamic Hotelling Duopoly with Linear Transportation Costs," Working Papers 398, Dipartimento Scienze Economiche, Universita' di Bologna.
    11. Nils‐Henrik M. von der Fehr & Kristin Stevik, 1998. "Persuasive Advertising and Product Differentiation," Southern Economic Journal, John Wiley & Sons, vol. 65(1), pages 113-126, July.
    12. Granot, Daniel & Granot, Frieda & Raviv, Tal, 2010. "On competitive sequential location in a network with a decreasing demand intensity," European Journal of Operational Research, Elsevier, vol. 205(2), pages 301-312, September.
    13. Lambertini, Luca, 2002. "Equilibrium locations in a spatial model with sequential entry in real time," Regional Science and Urban Economics, Elsevier, vol. 32(1), pages 47-58, January.
    14. Buechel, Berno & Roehl, Nils, 2015. "Robust equilibria in location games," European Journal of Operational Research, Elsevier, vol. 240(2), pages 505-517.
    15. Alain Egli, 2005. "On Stability in Competition: Tying and Horizontal Product Differentiation," Diskussionsschriften dp0501, Universitaet Bern, Departement Volkswirtschaft.
    16. Qiang Gong & Qihong Liu & Yi Zhang, 2016. "Optimal product differentiation in a circular model," Journal of Economics, Springer, vol. 119(3), pages 219-252, November.
    17. Steven J. Davis & Kevin M. Murphy & Robert H. Topel, 2004. "Entry, Pricing, and Product Design in an Initially Monopolized Market," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 188-225, February.
    18. Hassin, Refael & Nowik, Irit & Shaki, Yair Y., 2018. "On the price of anarchy in a single-server queue with heterogeneous service valuations induced by travel costs," European Journal of Operational Research, Elsevier, vol. 265(2), pages 580-588.
    19. Ralph M. Braid, 2014. "Search costs decrease prices in a model of spatial competition," Papers in Regional Science, Wiley Blackwell, vol. 93(1), pages 125-139, March.
    20. Tomasz Kopczewski & Maciej Pogorzelski, 2009. "Influence of the size of the company on developing of decision-making process of the enterprise concerning the spatial location," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 23.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00242963. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.