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The Importance of the Distribution of Consumers in Horizontal Product Differentiation

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  • Zenou, Yves
  • Calvó-Armengol, Antoni

Abstract

This Paper examines the importance of the distribution of consumers in Hotelling's circle on the comparison between the optimal and the market equilibrium levels of diversity. It finds that when most consumers are located very close to the firms, the result of Salop that the equilibrium number of firms is larger than the optimal one (surplus maximizing) can be reversed.

Suggested Citation

  • Zenou, Yves & Calvó-Armengol, Antoni, 2001. "The Importance of the Distribution of Consumers in Horizontal Product Differentiation," CEPR Discussion Papers 3031, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3031
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    8. SHILONY, Yuval, 1981. "Hotelling's competition with general customer distributions," LIDAM Reprints CORE 457, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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    Cited by:

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    6. Agrawal, David R. & Bagh, Adib & Mardan, Mohammed, 2025. "Sensitivity versus size: implications for tax competition," Theoretical Economics, Econometric Society, vol. 20(3), July.
    7. John Harter, 2019. "Endogenous Firm Location with a Decreasing Density of Consumers," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 8(2), pages 35-44, December.
    8. Torrisi, Gianpiero, 2008. "The model of the linear city under a triangular distribution of consumers: an empirical analysis on price and location of beverage kiosks in Catania," MPRA Paper 12694, University Library of Munich, Germany.
    9. Loertscher, Simon & Muehlheusser, Gerd, 2008. "Global and local players in a model of spatial competition," Economics Letters, Elsevier, vol. 98(1), pages 100-106, January.
    10. Francisco Martínez-Sánchez, 2022. "Privatization Policies by National and Regional Governments," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 24(02), pages 1-23, June.

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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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