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Does the product characteristic distance get closer or not? Differentiation and imitation in a hotelling model

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  • Kimura,Koichiro

Abstract

Is the distance between the product characteristics of firms in an industry getting closer or not in competition? Although many studies have been conducted on differentiation to get farther and imitation to get closer, neither has been analyzed within t he same framework. Therefore, this study introduces the concept of imitation into a Hoteling model on differentiation. We show that although firms are more profitable if they maintain differentiation, they face a prisoner’s dilemma in imitation and therefore t ry to imitate from each other as much as possible, which decreases their profits. As a result, competition brings the distance closer by imitation and promotes the standardization of product characteristics in that industry.

Suggested Citation

  • Kimura,Koichiro, 2023. "Does the product characteristic distance get closer or not? Differentiation and imitation in a hotelling model," IDE Discussion Papers 869, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper869
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    References listed on IDEAS

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    1. Matsumura, Toshihiro & Matsushima, Noriaki, 2012. "Welfare properties of strategic R&D investments in Hotelling models," Economics Letters, Elsevier, vol. 115(3), pages 465-468.
    2. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    3. Kou, Zonglai & Zhou, Min, 2015. "Hotelling’s competition with relative performance evaluation," Economics Letters, Elsevier, vol. 130(C), pages 69-71.
    4. Jacques-François Thisse & George Norman (ed.), 1994. "The Economics Of Product Differentiation," Books, Edward Elgar Publishing, volume 0, number 591.
    5. Kapur, Sandeep, 1995. "Technological Diffusion with Social Learning," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 173-195, June.
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    Cited by:

    1. Kimura,Koichiro, 2024. "Imitation Versus Differentiation: Balance Between Product Similarities and Differences in a Hotelling Model," IDE Discussion Papers 917, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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    More about this item

    Keywords

    Hotelling model|differentiation|imitation|standardization;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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