The Importance of the Distribution of Consumers in Horizontal Product Differentiation
This paper examines the importance of the distribution of consumers in Hotelling's circle on the comparison between the optimal and the market equilibrium levels of diversity. It finds that when most consumers are located very close to the firms, the result of Salop-that the equilibrium number of firms is larger than the optimal one (surplus maximizing)-can be reversed. Copyright 2002 Blackwell Publishers
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Volume (Year): 42 (2002)
Issue (Month): 4 ()
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References listed on IDEAS
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- Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
- Bloch, Francis & Manceau, Delphine, 1999. "Persuasive advertising in Hotelling's model of product differentiation," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 557-574, May.
- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
- Shilony, Yuval, 1981. "Hotelling's competition with general customer distributions," Economics Letters, Elsevier, vol. 8(1), pages 39-45.
- Neven, Damien J., 1986. "On Hotelling's competition with non-uniform customer distributions," Economics Letters, Elsevier, vol. 21(2), pages 121-126.
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