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On the consistent use of linear demand systems if not all varieties are available

Author

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  • Felix Höffler

    (WHU - Otto Beisheim School of Management)

Abstract

Linear demand formulations for price competition in horizontally differentiated products are sometimes used to compare situations where additional varieties become available, e.g. due to market entry of new firms. We derive a consistent demand system to analyze such situations and highlight potential problems that can arise from an inconsistent approach.

Suggested Citation

  • Felix Höffler, 2008. "On the consistent use of linear demand systems if not all varieties are available," Economics Bulletin, AccessEcon, vol. 4(14), pages 1-5.
    • Handle: RePEc:ebl:ecbull:eb-08d10008
    as

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    References listed on IDEAS

    as
    1. Inderst, Roman & Wey, Christian, 2004. "The incentives for takeover in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1067-1089, November.
    2. Dan Kovenock & Suddhasatwa Roy, 2005. "Free Riding in Noncooperative Entry Deterrence with Differentiated Products," Southern Economic Journal, John Wiley & Sons, vol. 72(1), pages 119-137, July.
    3. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
    4. Steven Fries & Damien Neven & Paul Seabright & Anita Taci, 2006. "Market entry, privatization and bank performance in transition1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(4), pages 579-610, October.
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    Cited by:

    1. Marc Bourreau & Johan Hombert & Jerome Pouyet & Nicolas Schutz, 2011. "Upstream Competition between Vertically Integrated Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 677-713, December.

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    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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