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Horizontal differentiation and price competition with sequential entry

Author

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  • Pierre Fleckinger

    (CECO - Laboratoire d'économétrie de l'École polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

  • Thierry Lafay

    (CECO - Laboratoire d'économétrie de l'École polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

Abstract

We study a class of differentiation games à la Hotelling. Two firms choose a price and a location in the consumers' space. The leader first chooses both variables, and the follower observes them before playing. It is shown that in such games, any equilibrium has the property that the follower always gets a greater profit (in the absence of entry barrier). An equilibrium is shown to always exist with linear costs and we qualify the equilibria with respect to the willingness to pay for the family of products. Some extensions are looked at. In particular, we investigate the effect of entry barriers on the strategies of the leader.

Suggested Citation

  • Pierre Fleckinger & Thierry Lafay, 2003. "Horizontal differentiation and price competition with sequential entry," Working Papers hal-00243021, HAL.
    • Handle: RePEc:hal:wpaper:hal-00243021
    Note: View the original document on HAL open archive server: https://hal.science/hal-00243021
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    References listed on IDEAS

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    1. B. Curtis Eaton & Richard G. Lipsey, 1975. "The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(1), pages 27-49.
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    Cited by:

    1. Fleckinger, Pierre & Lafay, Thierry, 2010. "Product flexibility and price competition in Hotelling's duopoly," Mathematical Social Sciences, Elsevier, vol. 60(1), pages 61-68, July.
    2. Fleckinger, Pierre & Lafay, Thierry, 2010. "Product flexibility and price competition in Hotelling's duopoly," Mathematical Social Sciences, Elsevier, vol. 60(1), pages 61-68, July.

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