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Oligopolistic Competition and the Optimal Provision of Products

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  • ANDERSON, Simon P.

    (CERGE, Charles University, Prague)

  • DE PALMA, André

    (COMIN, University of Geneva)

  • NESTEROV, Yurii

    () (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium)

Abstract

This paper considers the theory of market versus optimal product diversity in the light of two recent advances in oligopoly theory. The first is the development of discrete choice models to describe heterogeneous consumer tastes, and the application of such models to oligopolistic competition. The second advance is the proof that logconcavity of the consumer taste density guarantees the existence of a price equilibrium. Our main result is that logconcavity implies excessive product variety. This result extends to price-sensitive individual conditional demands, and calls into question previous results in the literature which left open the possibility of insufficient variety.

Suggested Citation

  • ANDERSON, Simon P. & DE PALMA, André & NESTEROV, Yurii, 1994. "Oligopolistic Competition and the Optimal Provision of Products," CORE Discussion Papers 1994034, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1994034
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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-1994.html
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    References listed on IDEAS

    as
    1. Mas-Colell, Andreu, 1991. "Indeterminacy in Incomplete Market Economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 1(1), pages 45-61, January.
    2. Geanakoplos, John & Mas-Colell, Andreu, 1989. "Real indeterminacy with financial assets," Journal of Economic Theory, Elsevier, pages 22-38.
    3. Debreu, Gerard, 1970. "Economies with a Finite Set of Equilibria," Econometrica, Econometric Society, vol. 38(3), pages 387-392, May.
    4. DUTTA, J. & POLEMARCHAKIS, Heracles, 1995. "Time to build and equilibrium contracts," CORE Discussion Papers 1995082, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Balasko, Yves & Cass, David & Siconolfi, Paolo, 1990. "The structure of financial equilibrium with exogenous yields : The case of restricted participation," Journal of Mathematical Economics, Elsevier, vol. 19(1-2), pages 195-216.
    6. Polemarchakis, H. M., 1988. "Portfolio choice, exchange rates, and indeterminacy," Journal of Economic Theory, Elsevier, vol. 46(2), pages 414-421, December.
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