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Heterogeneous preferences and location choice with multi-product firms

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  • Chisholm, Darlene C.
  • Norman, George

Abstract

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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  • Chisholm, Darlene C. & Norman, George, 2004. "Heterogeneous preferences and location choice with multi-product firms," Regional Science and Urban Economics, Elsevier, vol. 34(3), pages 321-339, May.
  • Handle: RePEc:eee:regeco:v:34:y:2004:i:3:p:321-339
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    References listed on IDEAS

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    1. Norman, George, 2002. "The relative advantages of flexible versus designated manufacturing technologies," Regional Science and Urban Economics, Elsevier, vol. 32(4), pages 419-445, July.
    2. 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.
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    Citations

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    Cited by:

    1. Takatoshi Tabuchi, 2009. "Hotelling's Spatial Competition Reconsidered," CIRJE F-Series CIRJE-F-674, CIRJE, Faculty of Economics, University of Tokyo.
    2. Wen-jhan Jane & Wei-peng Chen & Yuan-lin Hsu, 2015. "The impact of deregulation on the movie box office after Taiwan’s entry into the WTO: the difference-in-differences estimation," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 289-308, December.
    3. W. Walls, 2010. "Superstars and heavy tails in recorded entertainment: empirical analysis of the market for DVDs," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 34(4), pages 261-279, November.
    4. Shin-Kun Peng & Takatoshi Tabuchi, 2007. "Spatial Competition in Variety and Number of Stores," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(1), pages 227-250, March.
    5. Darlene Chisholm & Margaret McMillan & George Norman, 2010. "Product differentiation and film-programming choice: do first-run movie theatres show the same films?," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 34(2), pages 131-145, May.
    6. Helge Sanner, 2004. "Economy vs. History: What Does Actually Determine the Distribution of Firms' Locations in Cities?," Volkswirtschaftliche Diskussionsbeiträge 67, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät, revised Sep 2004.
    7. 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.
    8. Alan Collins & Antonello E. Scorcu & Roberto Zanola, 2009. "Distribution conventionality in the movie sector: an econometric analysis of cinema supply," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(8), pages 517-527.
    9. Darlene Chisholm, 2005. "Hollywood Economics: How Extreme Uncertainty Shapes The Film Industry," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 29(3), pages 233-237, August.
    10. Varela-Irimia, Xosé-Luís, 2011. "Multi-stage oligopoly models with nested logit demand structures: A simplifying approach," Working Papers 2072/179616, Universitat Rovira i Virgili, Department of Economics.
    11. Dominik Kress & Erwin Pesch, 2016. "Competitive Location and Pricing on Networks with Random Utilities," Networks and Spatial Economics, Springer, vol. 16(3), pages 837-863, September.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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