IDEAS home Printed from https://ideas.repec.org/p/hhs/nhhfms/2010_016.html
   My bibliography  Save this paper

Hotelling competition with multi-purchasing

Author

Listed:
  • Anderson, Simon P.

    (Dept. of Economics, University of Virginia)

  • Foros, Øystein

    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

  • Kind, Hans Jarle

    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

Abstract

We 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.

Suggested Citation

  • Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle, 2010. "Hotelling competition with multi-purchasing," Discussion Papers 2010/16, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2010_016
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/11250/164004
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
    2. de Palma, Andre & Leruth, Luc & Regibeau, Pierre, 1999. "Partial compatibility with network externalities and double purchase," Information Economics and Policy, Elsevier, vol. 11(2), pages 209-227, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Matthew Gentzkow & Jesse M. Shapiro, 2015. "Ideology and Online News," NBER Chapters, in: Economic Analysis of the Digital Economy, pages 169-190, National Bureau of Economic Research, Inc.
    2. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    3. Yu-Fu Chen & Michael Funke, 2010. "Global Warming And Extreme Events: Rethinking The Timing And Intensity Of Environmental Policy," Dundee Discussion Papers in Economics 236, Economic Studies, University of Dundee.
    4. Matthew Gentzkow & Jesse M. Shapiro & Michael Sinkinson, 2014. "Competition and Ideological Diversity: Historical Evidence from US Newspapers," American Economic Review, American Economic Association, vol. 104(10), pages 3073-3114, October.
    5. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle & Peitz, Martin, 2012. "Media market concentration, advertising levels, and ad prices," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 321-325.
    6. Rudiger, Jesper, 2013. "Cross-Checking the Media," MPRA Paper 51786, University Library of Munich, Germany.

    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. Anderson, Simon P. & Foros, Øystein & Kind, Hans Jarle, 2012. "Product quality, competition, and multi-purchasing," Discussion Papers 2012/9, Norwegian School of Economics, Department of Business and Management Science.
    2. Simon P. Anderson & Øystein Foros & Hans Jarle Kind, 2017. "Product Functionality, Competition, And Multipurchasing," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(1), pages 183-210, February.
    3. Cantillon, Estelle & Yin, Pai-Ling, 2008. "Competition between Exchanges: Lessons from the Battle of the Bund," CEPR Discussion Papers 6923, C.E.P.R. Discussion Papers.
    4. Simon P. Anderson & Oystein Foros & Hans Jarle Kind, 2010. "Hotelling Competition with Multi-Purchasing: Time Magazine, Newsweek, or both?," CESifo Working Paper Series 3096, CESifo.
    5. Julia Cage & Nicolas Hervé & Marie-Luce Viaud, 2017. "The Production of Information in an Online World: Is Copy Right?," Working Papers hal-03393171, HAL.
    6. Wlömert, Nils & Papies, Dominik, 2016. "On-demand streaming services and music industry revenues — Insights from Spotify's market entry," International Journal of Research in Marketing, Elsevier, vol. 33(2), pages 314-327.
    7. Grzybowski, Lukasz, 2014. "Fixed-to-mobile substitution in the European Union," Telecommunications Policy, Elsevier, vol. 38(7), pages 601-612.
    8. Julia Cagé & Nicolas Hervé & Marie-Luce Viaud, 2020. "The Production of Information in an Online World," Review of Economic Studies, Oxford University Press, vol. 87(5), pages 2126-2164.
    9. Dunker, Fabian & Hoderlein, Stefan & Kaido, Hiroaki, 2014. "Nonparametric Identification of Endogenous and Heterogeneous Aggregate Demand Models: Complements, Bundles and the Market Level," Economics Series 307, Institute for Advanced Studies.
    10. Lukasz Grzybowski & Frank Verboven, 2016. "Substitution between fixed-line and mobile access: the role of complementarities," Journal of Regulatory Economics, Springer, vol. 49(2), pages 113-151, April.
    11. Steven T. Berry & Philip A. Haile, 2021. "Foundations of Demand Estimation," Cowles Foundation Discussion Papers 2301, Cowles Foundation for Research in Economics, Yale University.
    12. Sergei Koulayev & Marc Rysman & Scott Schuh & Joanna Stavins, 2016. "Explaining adoption and use of payment instruments by US consumers," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 293-325, May.
    13. Roy Allen & John Rehbeck, 2020. "Identification of Random Coefficient Latent Utility Models," Papers 2003.00276, arXiv.org.
    14. Matthew Gentzkow & Jesse M. Shapiro & Michael Sinkinson, 2014. "Competition and Ideological Diversity: Historical Evidence from US Newspapers," American Economic Review, American Economic Association, vol. 104(10), pages 3073-3114, October.
    15. Zhou, Jidong, 2021. "Mixed bundling in oligopoly markets," Journal of Economic Theory, Elsevier, vol. 194(C).
    16. Kuroda, Toshifumi & Ida, Takanori & Koguchi, Teppei, 2015. "The impact of asymmetric regulation on product bundling: The case of fixed broadband and mobile communications in Japan," 2015 Regional ITS Conference, Los Angeles 2015 146318, International Telecommunications Society (ITS).
    17. Wang, Ao, 2023. "Sieve BLP: A semi-nonparametric model of demand for differentiated products," Journal of Econometrics, Elsevier, vol. 235(2), pages 325-351.
    18. Fu Ouyang & Thomas Tao Yang & Hanghui Zhang, 2020. "Semiparametric Identification and Estimation of Discrete Choice Models for Bundles," ANU Working Papers in Economics and Econometrics 2020-672, Australian National University, College of Business and Economics, School of Economics.
    19. Byung‐Cheol Kim & Jay Pil Choi, 2010. "Customer Information Sharing: Strategic Incentives and New Implications," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 403-433, June.
    20. André de Palma & Julien Monardo, 2017. "The General Nesting Logit (GNL) Model using Aggregate Data," Working Papers hal-01552455, HAL.

    More about this item

    Keywords

    Multi-purchase; incremental pricing; content competition;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:hhs:nhhfms:2010_016. 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: Stein Fossen (email available below). General contact details of provider: https://edirc.repec.org/data/dfnhhno.html .

    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.