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The Importance of the Distribution of Consumers in Horizontal Product Differentiation

Author

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  • Antoni Calvó‐Armengol
  • Yves Zenou

Abstract

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.

Suggested Citation

  • Antoni Calvó‐Armengol & Yves Zenou, 2002. "The Importance of the Distribution of Consumers in Horizontal Product Differentiation," Journal of Regional Science, Wiley Blackwell, vol. 42(4), pages 793-803.
    • Handle: RePEc:bla:jregsc:v:42:y:2002:i:4:p:793-803
    DOI: 10.1111/1467-9787.00282
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    Cited by:

    1. Chen, Yuwen & Ni, John & Yu, Degan, 2019. "Application developers’ product offering strategies in multi-platform markets," European Journal of Operational Research, Elsevier, vol. 273(1), pages 320-333.
    2. Gu, Yiquan & Rasch, Alexander & Wenzel, Tobias, 2022. "Consumer salience and quality provision in (un)regulated public service markets," Regional Science and Urban Economics, Elsevier, vol. 93(C).
    3. Torrisi, Gianpiero, 2008. "The model of the linear city under a triangular distribution of consumers: an empirical analysis on price and location of beverage kiosks in Catania," MPRA Paper 12694, University Library of Munich, Germany.
    4. Agrawal, David R. & Bagh, Adib & Mardan, Mohammed, 2025. "Sensitivity versus size: implications for tax competition," Theoretical Economics, Econometric Society, vol. 20(3), July.
    5. Loertscher, Simon & Muehlheusser, Gerd, 2008. "Global and local players in a model of spatial competition," Economics Letters, Elsevier, vol. 98(1), pages 100-106, January.
    6. Sedghi, Nafiseh & Shavandi, Hassan & Abouee-Mehrizi, Hossein, 2017. "Joint pricing and location decisions in a heterogeneous market," European Journal of Operational Research, Elsevier, vol. 261(1), pages 234-246.
    7. John Harter, 2019. "Endogenous Firm Location with a Decreasing Density of Consumers," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 8(2), pages 35-44, December.
    8. Gu Yiquan & Wenzel Tobias, 2012. "Price-Dependent Demand in Spatial Models," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-26, March.
    9. Fabio Dio & Luca Correani, 2020. "Quality-improving and cost-reducing strategic alliances," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(2), pages 493-524, July.
    10. Francisco Martínez-Sánchez, 2022. "Privatization Policies by National and Regional Governments," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 24(02), pages 1-23, June.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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