Multi-stage oligopoly models with nested logit demand structures: A simplifying approach
AbstractSolving multi-stage oligopoly models by backward induction can easily become a com- plex task when rms are multi-product and demands are derived from a nested logit frame- work. This paper shows that under the assumption that within-segment rm shares are equal across segments, the analytical expression for equilibrium pro ts can be substantially simpli ed. The size of the error arising when this condition does not hold perfectly is also computed. Through numerical examples, it is shown that the error is rather small in general. Therefore, using this assumption allows to gain analytical tractability in a class of models that has been used to approach relevant policy questions, such as for example rm entry in an industry or the relation between competition and location. The simplifying approach proposed in this paper is aimed at helping improving these type of models for reaching more accurate recommendations.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/179616.
Date of creation: 2011
Date of revision:
Oligopolis; 334 - Formes d'organització i cooperació en l'economia;
This paper has been announced in the following NEP Reports:
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.:
- Darlene Chisholm & George Norman, 2002.
"Heterogeneous Preferences and Location Choice with Multi-Product Firms,"
Discussion Papers Series, Department of Economics, Tufts University
0205, Department of Economics, Tufts University.
- Chisholm, Darlene C. & Norman, George, 2004. "Heterogeneous preferences and location choice with multi-product firms," Regional Science and Urban Economics, Elsevier, vol. 34(3), pages 321-339, May.
- Maarten C.W. Janssen & Vladimir A. Karamychev & Peran van Reeven, 2003.
"Multi-Store Competition: Market Segmentation or Interlacing?,"
Tinbergen Institute Discussion Papers
03-033/1, Tinbergen Institute.
- Janssen, Maarten C.W. & Karamychev, Vladimir A. & van Reeven, Peran, 2005. "Multi-store competition: Market segmentation or interlacing?," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 700-714, November.
- Economides, Nicholas, 1993. "Quality variations in the circular model of variety-differentiated products," Regional Science and Urban Economics, Elsevier, vol. 23(2), pages 235-257, April.
- 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.
- Christou, Charalambos & Vettas, Nikolaos, 2005. "Location choices under quality uncertainty," Mathematical Social Sciences, Elsevier, vol. 50(3), pages 268-278, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ariadna Casals).
If references are entirely missing, you can add them using this form.