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Heterogeneous Preferences and Location Choice with Multi-Product Firms

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  • Darlene Chisholm
  • George Norman

Abstract

This paper investigates whether the principle of minimum differentiation extends to the location choices of multi-product firms of different sizes supplying differentiated goods to consumers with heterogeneous tastes. Our analysis explicitly allows for the possibility that the resulting location equilibria will be asymmetric, and we compare the multiproduct equilibria with the location configurations that would arise if each outlet were operated by a single-product firm. We show that multi-product firms disperse their products if consumer heterogeneity is low or distance between markets is high. They adopt more dispersed locations than single product firms to limit business stealing from their own outlets. Asymmetry is shown to characterize location configurations of both multi-product and single-product firms.

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Bibliographic Info

Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0205.

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Date of creation: 2002
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Handle: RePEc:tuf:tuftec:0205

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Keywords: multi-product firms; location; heterogeneous tastes;

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  1. Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521315647.
  2. HAMILTON, John H. & MacLEOD, W. Bentley & THISSE, Jacques-François, . "Spatial competition and the core," CORE Discussion Papers RP -986, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Hummels, David & Levinsohn, James A, 1993. "Product Differentiation as a," American Economic Review, American Economic Association, vol. 83(2), pages 445-49, May.
  4. James Brander & Jonathan Eaton, 1982. "Product Line Rivalry," Working Papers 519, Queen's University, Department of Economics.
  5. Anderson, Simon P & de Palma, Andre, 1992. "Multiproduct Firms: A Nested Logit Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 40(3), pages 261-76, September.
  6. George Norman & Lynne Pepall, 2000. "Profitable Mergers in a Cournot Model of Spatial Competition," Southern Economic Journal, Southern Economic Association, vol. 66(3), pages 667-681, January.
  7. Borenstein, Severin & Netz, Janet, 1999. "Why do all the flights leave at 8 am?: Competition and departure-time differentiation in airline markets," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 611-640, July.
  8. Eaton, B Curtis & Lipsey, Richard G, 1975. "The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition," Review of Economic Studies, Wiley Blackwell, vol. 42(1), pages 27-49, January.
  9. Victor Ginsburgh & André De Palma & Yorgo Papageorgiou & Jacques-François Thisse, 1995. "The principle of minimum differentiation holds under sufficient heterogeneity," ULB Institutional Repository 2013/3317, ULB -- Universite Libre de Bruxelles.
  10. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
  11. Martinez-Giralt, Xavier & Neven, Damien J, 1988. "Can Price Competition Dominate Market Segmentation?," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 431-42, June.
  12. HAMILTON, Jonathan H. & THISSE, Jacques-François & WESKAMP, Anita, . "Spatial discrimination. Bertrand vs. Cournot in a model of location choice," CORE Discussion Papers RP -846, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Pal, Debashis & Sarkar, Jyotirmoy, 2002. "Spatial competition among multi-store firms," International Journal of Industrial Organization, Elsevier, vol. 20(2), pages 163-190, February.
  14. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, December.
  15. Darlene C. Chisholm & George Norman, 2002. "Spatial Competition and Demand: An Application to Motion Pictures," Discussion Papers Series, Department of Economics, Tufts University 0216, Department of Economics, Tufts University.
  16. George Norman, 2000. "The Relative Advantages of Flexible versus Designated Manufacturing Technologies," Discussion Papers Series, Department of Economics, Tufts University 0019, Department of Economics, Tufts University.
  17. Anderson, Simon P & Neven, Damien J, 1991. "Cournot Competition Yields Spatial Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 793-808, November.
  18. Braid, Ralph M., 1988. "Heterogeneous preferences and non-central agglomeration of firms," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 57-68, February.
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Citations

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Cited by:
  1. Darlene C. Chisholm & Margaret S. McMillan & George Norman, 2006. "Product Differentiation and Film Programming Choice: Do First-Run Movie Theatres Show the Same Films?," NBER Working Papers 12646, National Bureau of Economic Research, Inc.
  2. Shin-Kun Peng & Takatoshi Tabuchi, 2005. "Spatial Competition in Variety and Number of Stores," CIRJE F-Series CIRJE-F-360, CIRJE, Faculty of Economics, University of Tokyo.
  3. Darlene Chisholm, 2005. "Hollywood Economics: How Extreme Uncertainty Shapes The Film Industry," Journal of Cultural Economics, Springer, vol. 29(3), pages 233-237, August.
  4. Alan Collins & Antonello E. Scorcu & Roberto Zanola, 2009. "Distribution conventionality in the movie sector: an econometric analysis of cinema supply," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(8), pages 517-527.
  5. Varela-Irimia, Xosé-Luís, 2011. "Multi-stage oligopoly models with nested logit demand structures: A simplifying approach," Working Papers 2072/179616, Universitat Rovira i Virgili, Department of Economics.
  6. W. Walls, 2010. "Superstars and heavy tails in recorded entertainment: empirical analysis of the market for DVDs," Journal of Cultural Economics, Springer, vol. 34(4), pages 261-279, November.
  7. Takatoshi Tabuchi, 2009. "Hotelling's Spatial Competition Reconsidered," CIRJE F-Series CIRJE-F-674, CIRJE, Faculty of Economics, University of Tokyo.
  8. Darlene C. Chisholm & George Norman, 2002. "Spatial Competition and Demand: An Application to Motion Pictures," Discussion Papers Series, Department of Economics, Tufts University 0216, Department of Economics, Tufts University.
  9. Helge Sanner, 2004. "Economy vs. History: What Does Actually Determine the Distribution of Firms' Locations in Cities?," Volkswirtschaftliche Diskussionsbeiträge 67, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät, revised Sep 2004.

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