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Heterogeneous preferences and location choice with multi-product firms

  • Chisholm, Darlene C.
  • Norman, George

This paper investigates whether the principle of minimum differentiation extends to the location choices of multi-product firms of different sizes supplying differentiated goods to consumers with heterogeneous tastes. Our analysis explicitly allows for the possibility that the resulting location equilibria will be asymmetric, and we compare the multiproduct equilibria with the location configurations that would arise if each outlet were operated by a single-product firm. We show that multi-product firms disperse their products if consumer heterogeneity is low or distance between markets is high. They adopt more dispersed locations than single product firms to limit business stealing from their own outlets. Asymmetry is shown to characterize location configurations of both multi-product and single-product firms.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 34 (2004)
Issue (Month): 3 (May)
Pages: 321-339

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Handle: RePEc:eee:regeco:v:34:y:2004:i:3:p:321-339
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  1. Victor Ginsburgh & André De Palma & Yorgo Papageorgiou & Jacques-François Thisse, 1995. "The principle of minimum differentiation holds under sufficient heterogeneity," ULB Institutional Repository 2013/3317, ULB -- Universite Libre de Bruxelles.
  2. Simon P. Anderston & Andre de Palma, 1991. "Multiproduct Firms: A Nested Logit Approach," Discussion Papers 973, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. HAMILTON, John H. & MacLEOD, W. Bentley & THISSE, Jacques-François, . "Spatial competition and the core," CORE Discussion Papers RP 986, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. 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.
  5. Braid, Ralph M., 1988. "Heterogeneous preferences and non-central agglomeration of firms," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 57-68, February.
  6. Hamilton, Jonathan H. & Thisse, Jacques-Francois & Weskamp, Anita, 1989. "Spatial discrimination : Bertrand vs. Cournot in a model of location choice," Regional Science and Urban Economics, Elsevier, vol. 19(1), pages 87-102, February.
  7. d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "On Hotelling's "Stability in competition"," CORE Discussion Papers RP 385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Darlene C. Chisholm & George Norman, 2002. "Spatial Competition and Demand: An Application to Motion Pictures," Discussion Papers Series, Department of Economics, Tufts University 0216, Department of Economics, Tufts University.
  9. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, December.
  10. Anderson, Simon P & Neven, Damien J, 1991. "Cournot Competition Yields Spatial Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 793-808, November.
  11. B. Curtis Eaton & Richard G. Lipsey, 1975. "The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition," Review of Economic Studies, Oxford University Press, vol. 42(1), pages 27-49.
  12. Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521315647, November.
  13. George Norman & Lynne Pepall, 2000. "Profitable Mergers in a Cournot Model of Spatial Competition," Southern Economic Journal, Southern Economic Association, vol. 66(3), pages 667-681, January.
  14. repec:ulb:ulbeco:2013/1759 is not listed on IDEAS
  15. Pal, Debashis & Sarkar, Jyotirmoy, 2002. "Spatial competition among multi-store firms," International Journal of Industrial Organization, Elsevier, vol. 20(2), pages 163-190, February.
  16. James Brander & Jonathan Eaton, 1982. "Product Line Rivalry," Working Papers 519, Queen's University, Department of Economics.
  17. Borenstein, Severin & Netz, Janet, 1999. "Why do all the flights leave at 8 am?: Competition and departure-time differentiation in airline markets," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 611-640, July.
  18. Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521305525, November.
  19. Hummels, David & Levinsohn, James A, 1993. "Product Differentiation as a," American Economic Review, American Economic Association, vol. 83(2), pages 445-49, May.
  20. George Norman, 2000. "The Relative Advantages of Flexible versus Designated Manufacturing Technologies," Discussion Papers Series, Department of Economics, Tufts University 0019, Department of Economics, Tufts University.
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