Fringe firms: Are they better off in a heterogeneous market?
AbstractThis paper analyzes a market with three firms. One of them is the dominant firm and the two others are fringe firms. The formulation of demand allows a comparison between price competition with heterogeneous and homogeneous products. Because a parameterization is required to assure that market size is the same in both scenarios, no general conclusions can be drawn. But it can be shown that in large markets with relatively inelastic demand for the fringe firms’ products and a cost advantage of the dominant firm, the fringe firms are better off if they produce a heterogeneous product.
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Bibliographic InfoPaper provided by University of Cologne, Department of Economics in its series Working Paper Series in Economics with number 31.
Date of creation: 26 Jun 2007
Date of revision:
dominant firm; competitive fringe; price competition; heterogeneous products;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- 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:
- NEP-ALL-2007-06-30 (All new papers)
- NEP-BEC-2007-06-30 (Business Economics)
- NEP-COM-2007-06-30 (Industrial Competition)
- NEP-CSE-2007-06-30 (Economics of Strategic Management)
- NEP-MIC-2007-06-30 (Microeconomics)
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