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Differentiation in a Two-Dimensional Market with Endogenous Sequential Entry

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  • Michler, Jeffrey D.
  • Gramig, Benjamin M.

Abstract

Previous research on two-dimensional extensions of Hotelling's location game has argued that spatial competition leads to maximum differentiation in one dimensions and minimum differentiation in the other dimension. We expand on existing models to allow for endogenous entry into the market. We find that competition may lead to the min/max finding of previous work but also may lead to maximum differentiation in both dimensions. The critical issue in determining the degree of differentiation is if existing firms are seeking to deter entry of a new firm or to maximizing profits within an existing, stable market.
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  • Michler, Jeffrey D. & Gramig, Benjamin M., 2012. "Differentiation in a Two-Dimensional Market with Endogenous Sequential Entry," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124845, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea12:124845
    DOI: 10.22004/ag.econ.124845
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    References listed on IDEAS

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