The Competitive Effects of Price-Floors
AbstractWe analyze the effects of a legally-binding price floor using Hotelling's model of locational competition. A moderate price-floor destroys the maximal differentiation equilibrium of d'Aspremont et. al., by allowing firms to compete more aggressively for market share. Minimum differentiation results, with lower equilibrium prices. A low price floor results in mulitiple equilibria - both minimum and maximum differentiation are possible.
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Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 9609001.
Length: 28 pages
Date of creation: 02 Sep 1996
Date of revision:
Note: Type of Document - Scientific Word generated DVI file; prepared on Pc compatible; to print on any; pages: 28; figures: request from author
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product differentiation; vertical restraints;
Other versions of this item:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
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- d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979.
"On Hotelling's "Stability in Competition","
Econometric Society, vol. 47(5), pages 1145-50, September.
- John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
- Bester, Helmut & de Palma, Andre & Leininger, Wolfgang & Thomas, Jonathan & von Thadden, Ernst-Ludwig, 1996. "A Noncooperative Analysis of Hotelling's Location Game," Games and Economic Behavior, Elsevier, vol. 12(2), pages 165-186, February.
- Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
- Chia-Hung Sun & Fu-Chuan Lai, 2013. "Hotelling was right with decreasing returns to scale and a coalition-proof refinement," The Annals of Regional Science, Springer, vol. 50(3), pages 953-971, June.
- Wen-Chung Guo & Fu-Chuan Lai, 2014. "Spatial competition with quadratic transport costs and one online firm," The Annals of Regional Science, Springer, vol. 52(1), pages 309-324, January.
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