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A LOCATION MODEL WITH PREFERENCE FOR VARIETY -super-

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  • HYUNHO KIM
  • KONSTANTINOS SERFES

Abstract

We propose a new location model where consumers are allowed to make multiple purchases (i.e., one unit from each firm). This model may fit many markets (e.g. newspapers, credit cards) better than existing models. A common feature of these markets is that some consumers are loyal to one brand, while others consume more than one product. Our model yields predictions consistent with this observation. If firms are allowed to choose their locations on the interval, then spatial differentiation may not be maximal and in some cases it may even be minimal. Thus, under certain conditions, we restore Hotelling's Principle of Minimum Differentiation. Copyright Blackwell Publishing Ltd. 2006.

Suggested Citation

  • Hyunho Kim & Konstantinos Serfes, 2006. "A LOCATION MODEL WITH PREFERENCE FOR VARIETY -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 54(4), pages 569-595, December.
  • Handle: RePEc:bla:jindec:v:54:y:2006:i:4:p:569-595
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    Cited by:

    1. Takeshi Ebina & Noriaki Matsushima, 2017. "Product differentiation and entry timing in a continuous-time spatial competition model with vertical relations," ISER Discussion Paper 1009, Institute of Social and Economic Research, Osaka University.
    2. Doh-Shin Jeon & Nikrooz Nasr, 2016. "News Aggregators and Competition among Newspapers on the Internet," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 91-114, November.
    3. Takeshi Ebina & Noriaki Matsushima & Katsumasa Nishide, 2017. "Demand uncertainty, product differentiation, and entry timing under spatial competition," ISER Discussion Paper 1007, Institute of Social and Economic Research, Osaka University.

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