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The Importance of the Distribution of Consumers in Horizontal Product Differentiation


  • Antoni Calvó-Armengol
  • Yves Zenou


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

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

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    References listed on IDEAS

    1. 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.
    2. Neven, Damien J., 1986. "On Hotelling's competition with non-uniform customer distributions," Economics Letters, Elsevier, vol. 21(2), pages 121-126.
    3. Jehiel, Philippe, 1992. "Product differentiation and price collusion," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 633-641, December.
    4. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9780521171960, March.
    5. Kats, Amoz, 1995. "More on Hotelling's stability in competition," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 89-93, March.
    6. Masahisa Fujita & Jacques-François Thisse, 1986. "Spatial Competition with a Land Market: Hotelling and Von Thunen Unified," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 819-841.
    7. Economides, Nicholas, 1984. "Do increases in preference similarity (across countries) induce increases in trade? : An affirmative example," Journal of International Economics, Elsevier, vol. 17(3-4), pages 375-381, November.
    8. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    9. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
    10. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    11. Shilony, Yuval, 1981. "Hotelling's competition with general customer distributions," Economics Letters, Elsevier, vol. 8(1), pages 39-45.
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. Martínez-Sánchez, Francisco, 2014. "Privatization Policies by National and Regional Governments," MPRA Paper 58836, University Library of Munich, Germany.

    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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