Competition in Multi-characteristics Spaces: Hotelling Was Almost Right
Lancasterian models of product differentiation typically assume a one- dimensional characteristics space. We show that standard results on prices and locations no longer hold when firms compete in a multi- characteristics space. In the location game with n characteristics, firms choose to maximize differentiation in the dominant characteristic and to minimize differentiation in the others when the salience coefficient of the former is sufficiently large. Thus, the principle of minimum dif- ferentiation holds for all but one characteristic. Furthermore, prices do not necessarily fall when products get closer in the characteristics space because price competition is relaxed when products are differentiated enough in the dominant characteristic.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- B. Curtis Eaton & Myrna Holtz Wooders, 1985. "Sophisticated Entry in a Model of Spatial Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 282-297, Summer.
- d'ASPREMONT, C. & GABSZEZWICZ, Jean J. & THISSE, J.-F., .
"Product differences and prices,"
CORE Discussion Papers RP
-508, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Simon, Herbert A., 1978.
"Rational Decision-Making in Business Organizations,"
Nobel Prize in Economics documents
1978-1, Nobel Prize Committee.
- Simon, Herbert A, 1979. "Rational Decision Making in Business Organizations," American Economic Review, American Economic Association, vol. 69(4), pages 493-513, September.
- Andrew Caplin & Barry Nalebuff, 1990.
"Aggregation and Imperfect Competition: On the Existence of Equilibrium,"
Cowles Foundation Discussion Papers
937, Cowles Foundation for Research in Economics, Yale University.
- Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
- Caplin, A. & Nalebuff, B., 1989. "Aggregation And Imperfect Competition: On The Existence Of Equilibrium," Discussion Papers 1989_30, Columbia University, Department of Economics.
- Gary-Bobo, R.J., 1987.
"Cournot-Walras and locally consistent equilbria,"
CORE Discussion Papers
1987053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Fujita, Masahisa & Thisse, Jacques-Francois, 1996.
"Economics of Agglomeration,"
Journal of the Japanese and International Economies,
Elsevier, vol. 10(4), pages 339-378, December.
- Fujita, M. & Thisse, J.-F., . "Economics of agglomeration," CORE Discussion Papers RP -1250, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Fujita, Masahisa & Thisse, Jacques-François, 1996. "Economics of Agglomeration," CEPR Discussion Papers 1344, C.E.P.R. Discussion Papers.
- Egbert Dierker, 1989. "Competition for Customers," Discussion Paper Serie A 244, University of Bonn, Germany.
- Asim Ansari & Nicholas Economides & Joel Steckel, 1997.
"The Max-Min-Min Principle of Product Differentiation,"
- Ansari, A. & Economides, N. & Steckel, J., 1996. "The Max-Min-Min Principle of product Differentiation," Working Papers 96-10, New York University, Leonard N. Stern School of Business, Department of Economics.
- Green, Paul E & Srinivasan, V, 1978. " Conjoint Analysis in Consumer Research: Issues and Outlook," Journal of Consumer Research, University of Chicago Press, vol. 5(2), pages 103-23, Se.
- Swann, Peter, 1990. "Product competition and the dimensions of product space," International Journal of Industrial Organization, Elsevier, vol. 8(2), pages 281-295, June.
- Bonanno, Giacomo, 1988. "Oligopoly Equilibria When Firms Have Local Knowledge of Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 45-55, February.
- Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
- Mark B. Vandenbosch & Charles B. Weinberg, 1995. "Product and Price Competition in a Two-Dimensional Vertical Differentiation Model," Marketing Science, INFORMS, vol. 14(2), pages 224-249.
- Anderson, Simon P. & Goeree, Jacob K. & Ramer, Roald, 1997. "Location, Location, Location," Journal of Economic Theory, Elsevier, vol. 77(1), pages 102-127, November.
- Tabuchi, T. & Thisse, J.-F., .
"Asymetric equilibria in spatial competition,"
CORE Discussion Papers RP
-1151, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Martinez-Giralt, Xavier & Neven, Damien J, 1988. "Can Price Competition Dominate Market Segmentation?," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 431-42, June.
- Bonanno, Giacomo & Christopher Zeeman, E., 1985. "Limited knowledge of demand and oligopoly equilibria," Journal of Economic Theory, Elsevier, vol. 35(2), pages 276-283, August.
- Tabuchi, Takatoshi, 1994. "Two-stage two-dimensional spatial competition between two firms," Regional Science and Urban Economics, Elsevier, vol. 24(2), pages 207-227, April.
- Neven, D. & Thisse, J-F., 1989. "On Quality And Variety Competition," CORE Discussion Papers 1989020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:78:y:1998:i:1:p:76-102. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.