Bertrand-Edgeworth competition with substantial product differentiation
AbstractSince Kreps and Scheinkman's seminal article (1983) a large number of papers have analyzed capacity constraints' potential to relax price competition. However, the ensuing literature has assumed that products are either perfect or very close substitutes. Therefore none of the papers has investigated the interaction between capacity constraints and substantial local monopoly power. The aim of the present paper is to shed light on this question using a standard Hotelling setup. The high level of product dfferentiation results in a variety of equilibrium firm behavior and it generates at least one pure strategy equilibrium for any capacity level. Thus the presence of local monopoly power challenges one of the most general findings about Bertrand-Edgeworth competition: the non-existence of pure strategy equilibria for some capacity levels.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 1332.
Length: 23 pages
Date of creation: Sep 2013
Date of revision:
Duopoly; Bertrand-Edgeworth competition; Hotelling; Capacity constraint;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thomas P. Lyon, 1999. "Quality Competition, Insurance, and Consumer Choice in Health Care Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(4), pages 546-580, December.
- Esther Gal-Or, 1997. "Exclusionary Equilibria in Health-Care Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 5-43, 03.
- Lepore, Jason J., 2012. "Cournot outcomes under Bertrand–Edgeworth competition with demand uncertainty," Journal of Mathematical Economics, Elsevier, vol. 48(3), pages 177-186.
- Daron Acemoglu & Kostas Bimpikis & Asuman Ozdaglar, 2006.
"Price and Capacity Competition,"
NBER Working Papers
12804, National Bureau of Economic Research, Inc.
- Yin, Xiangkang, 2004.
"Two-part tariff competition in duopoly,"
International Journal of Industrial Organization,
Elsevier, vol. 22(6), pages 799-820, June.
- repec:ner:carlos:info:hdl:10016/15757 is not listed on IDEAS
- Xavier Wauthy, 1996. "Capacity constraints may restore the existence of an equilibrium in the Hotelling model," Journal of Economics, Springer, vol. 64(3), pages 315-324, October.
- Koji Ishibashi & Toyokazu Kaneko, 2008. "Partial privatization in mixed duopoly with price and quality competition," Journal of Economics, Springer, vol. 95(3), pages 213-231, December.
- repec:ner:louvai:info:hdl:2078.1/46677 is not listed on IDEAS
- de Frutos, Maria-Angeles & Fabra, Natalia, 2007.
"Endogenous Capacities and Price Competition: The Role of Demand Uncertainty,"
CEPR Discussion Papers
6096, C.E.P.R. Discussion Papers.
- de Frutos, María-Ángeles & Fabra, Natalia, 2011. "Endogenous capacities and price competition: The role of demand uncertainty," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 399-411, July.
- Brekke, Kurt R. & Nuscheler, Robert & Straume, Odd Rune, 2002.
"Quality and location choices under price regulation,"
Discussion Papers, Research Unit: Market Processes and Governance
FS IV 02-28, Social Science Research Center Berlin (WZB).
- Kurt R. Brekke & Robert Nuscheler & Odd Rune Straume, 2006. "Quality and Location Choices under Price Regulation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 207-227, 03.
- Brekke, Kurt R. & Nuscheler, Robert & Straume, Odd Rune, 2002. "Quality and location choices under price regulation," Working Papers in Economics 24/02, University of Bergen, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Adrienn Foldi).
If references are entirely missing, you can add them using this form.