Hotelling competition with multi-purchasing
AbstractWe analyze a Hotelling model where consumers either buy one out of two goods (single-purchase) or both (multi-purchase). The firms’ pricing strategies turn out to be fundamentally different if some consumers multi-purchase compared to if all single-purchase. Prices are strategic complements under single-purchase, and increase with quality. In a multi-purchase regime, in contrast, prices are strategically independent because firms then act monopolistically by pricing the incremental benefit to marginal consumers. Furthermore, prices can decrease with quality due to overlapping characteristics. Higher preference heterogeneity increases prices and profits in equilibrium with single-purchase, but decreases them with multi-purchase.
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Bibliographic InfoPaper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2010/16.
Length: 33 pages
Date of creation: 11 Dec 2010
Date of revision:
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Multi-purchase; incremental pricing; content competition;
Find related papers by JEL classification:
- G00 - Financial Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-23 (All new papers)
- NEP-COM-2010-12-23 (Industrial Competition)
- NEP-MIC-2010-12-23 (Microeconomics)
- NEP-MKT-2010-12-23 (Marketing)
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.:
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"Media Market Concentration, Advertising Levels, and Ad Prices,"
CESifo Working Paper Series
3677, CESifo Group Munich.
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