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- Two-Stage Models Of Product Differentiation With Unit-Elastic Demand

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  • Martin Peitz

    (Universidad de Alicante)

Abstract

Models of product differentiation try to provide answers to the question which good will be provided in an imperfectly competitive market and how it will be priced. In such models consumers have been modeled as buying one unit of one good in the market. I construct counterparts to frequently used models of product differentiation in which consumers have unit-elastic demand, provide conditions which guarantee the existence of a unique price equilibrium, and characterize the unique subgame perfect equilibrium of the two-stage game in which firms first specify products and then compete in prices. In these models the discrete choice is affected by relative as opposed to absolute price changes. Models analyzed in this paper are counterparts to the Hotelling models, the circle model, and a model of vertical product differentiation.

Suggested Citation

  • Martin Peitz, 1998. "- Two-Stage Models Of Product Differentiation With Unit-Elastic Demand," Working Papers. Serie AD 1998-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1998-18
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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1998-18.pdf
    File Function: Fisrt version / Primera version, 1998
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    Citations

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    Cited by:

    1. Martin Peitz, 1999. "A difficulty with the address models of product differentiation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 14(3), pages 717-727.
    2. Martin Peitz, 1998. "- Consumer Heterogeneity And Market Imperfections," Working Papers. Serie AD 1998-16, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    3. Peitz, Martin, 2000. "Aggregation in a Model of Price Competition," Journal of Economic Theory, Elsevier, vol. 90(1), pages 1-38, January.

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