- A Difficulty With The Address Models Of Product Differentiation
In models of product differentiation and location models it is implicitly assumed that consumers can afford to buy the differentiated goods in the market. I show that with income heterogeneity there are severe existence problems of a price equilibrium in models of horizontal product differentiation with unit demand because some consumers are income-constrained. The result generalizes to other models of product differentiation, search, and switching costs. I present an alternative specification of variable individual demand in which this kind of existence problem cannot arise.
|Date of creation:||Sep 1998|
|Date of revision:|
|Publication status:||Published by Ivie|
|Contact details of provider:|| Postal: |
Phone: +34 96 319 00 50
Fax: +34 96 319 00 55
Web page: http://www.ivie.es/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979.
"On Hotelling's "Stability in Competition","
Econometric Society, vol. 47(5), pages 1145-50, September.
- Bockem, Sabine, 1994. "A Generalized Model of Horizontal Product Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 287-98, September.
- Cremer, Helmuth & Thisse, Jacques-Francois, 1991.
"Location Models of Horizontal Differentiation: A Special Case of Vertical Differentiation Models,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 39(4), pages 383-90, June.
- CREMER, Helmuth & THISSE, Jacques-François, . "Location models of horizontal differentiation: a special case of vertical differentiation models," CORE Discussion Papers RP -931, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Martin Peitz, 1996.
"Differentiated bertrand duopoly with variable demand,"
Working Papers. Serie AD
1996-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Peitz, Martin, 1997. "Differentiated Bertrand duopoly with variable demand," Research in Economics, Elsevier, vol. 51(2), pages 85-100, June.
- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
- GABSZEWICZ, Jean J. & THISSE, Jacques-François, .
"Price competition, quality and income disparities,"
CORE Discussion Papers RP
-370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Peitz, Martin, 1995. "Utility maximization in models of discrete choice," Economics Letters, Elsevier, vol. 49(1), pages 91-94, July.
- Andrew Caplin & Barry Nalebuff, 1990.
"Aggregation and Imperfect Competition: On the Existence of Equilibrium,"
Cowles Foundation Discussion Papers
937, Cowles Foundation for Research in Economics, Yale University.
- Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
- Caplin, A. & Nalebuff, B., 1989. "Aggregation And Imperfect Competition: On The Existence Of Equilibrium," Discussion Papers 1989_30, Columbia University, Department of Economics.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
- Economides, Nicholas, 1984. "The principle of minimum differentiation revisited," European Economic Review, Elsevier, vol. 24(3), pages 345-368, April.
- 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).
When requesting a correction, please mention this item's handle: RePEc:ivi:wpasad:1998-21. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Departamento de Edición)
If references are entirely missing, you can add them using this form.