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A model of multiproduct price competition

Author

Listed:
  • Amparo Urbano Salvador

    (Universitat de València)

  • Junichi Watanabe

    (Dpt. Economics)

  • Yair Tauman

    (Dpt. Economics)

Abstract

Strategic interaction in oligopolistic markets has been extensively studied in the literature. This literature deals mostly with the case of multiple firms which produce a homogeneous good or goods that are perfect substitutes. In this paper we provide a simple model of price competition in a multiproduct oligopoly market. We find that apure strategy equilibrium exists and that the equilibrium consumption sets are efficient since they maximize the total social surplus. If the willingness to pay function of the consumer is convex, the set of equilibrium prices coincides with the core of a related game and the firms extract total industry surplus. If it is concave, the only equilibrium price of a product is its marginal contribution to the consumer's total willingness to pay. If the products are perfect substitutes we obtain the standard Bertrand equilibrium.

Suggested Citation

  • Amparo Urbano Salvador & Junichi Watanabe & Yair Tauman, 1996. "A model of multiproduct price competition," Working Papers. Serie AD 1996-07, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1996-07
    as

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    2. Wooders, Myrna, 2008. "Market games and clubs," MPRA Paper 33968, University Library of Munich, Germany, revised Dec 2010.
    3. Francisco Robles & Marina Núñez, 2014. "One-seller assignment markets with multiunit demands," UB School of Economics Working Papers 2014/316, University of Barcelona School of Economics.
    4. Álvarez-Sanjaime, Óscar & Cantos-Sánchez, Pedro & Moner-Colonques, Rafael & Sempere-Monerris, Jose J., 2020. "A three-stage competition game in an air transport network under asymmetric valuation of flight frequencies," Economics of Transportation, Elsevier, vol. 21(C).
    5. Arribas, I. & Urbano, A., 2017. "Multiproduct trading with a common agent under complete information: Existence and characterization of Nash equilibrium," Journal of Economic Theory, Elsevier, vol. 167(C), pages 14-38.
    6. Prasad Krishnamurthy, 2025. "A simple model of natural oligopoly with an unlimited number of firms," Economics Bulletin, AccessEcon, vol. 45(2), pages 896-909.
    7. Liao, Chun-Hsiung & Tauman, Yair, 2002. "The role of bundling in price competition," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 365-389, March.
    8. Peter Achim & Roland Strausz, 2025. "Oligopolistic Information Markets," Rationality and Competition Discussion Paper Series 554, CRC TRR 190 Rationality and Competition.
    9. Jan Knoepfle, 2024. "Dynamic Competition for Attention," Papers 2409.18595, arXiv.org, revised Oct 2024.
    10. Ming-Chung Chang & Jin-Li Hu & Mei-Yu Lee, 2012. "Economic And Environmental Effects Of Refill Packs," Bulletin of Economic Research, Wiley Blackwell, vol. 64(4), pages 581-592, October.
    11. Ivan Arribas & Amparo Urbano, 2004. "Mixed Bundling Strategies And Multiproduct Price Competition," Working Papers. Serie AD 2004-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    12. Arribas, Ivan & Urbano, Amparo, 2005. "Nash equilibria in a model of multiproduct price competition: an assignment problem," Journal of Mathematical Economics, Elsevier, vol. 41(3), pages 351-385, April.

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