IDEAS home Printed from https://ideas.repec.org/p/pur/prukra/1221.html
   My bibliography  Save this paper

Microfoundations for the Linear Demand Product Differentiation Model, with Applications

Author

Listed:
  • Stephen Martin

Abstract

This paper shows (1) that the Spence-Dixit-Vives model of linear demand for differentiated varieties is implied if supplies of substitutes reduce individual consumers' reservation prices as indicated in the paper, (2) that for the micro-foundation-based version SDV demand and endogenous sunk costs, the equilibrium number of varieties is independent of the number of consumers in the market and the marginal cost of a variety of unit quality, and (3) that with endogenous sunk cost, if demand does not expand with the number of varieties (as in the SDV model), the equilibrium number of varieties is unchanged, but equilibrium qualities and quantities purchased are less, all else equal.

Suggested Citation

  • Stephen Martin, 2009. "Microfoundations for the Linear Demand Product Differentiation Model, with Applications," Purdue University Economics Working Papers 1221, Purdue University, Department of Economics.
  • Handle: RePEc:pur:prukra:1221
    as

    Download full text from publisher

    File URL: http://www.krannert.purdue.edu/programs/phd/Working-papers-series/2009/1221.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Belleflamme, Paul & Toulemonde, Eric, 2016. "Who benefits from increased competition among sellers on B2C platforms?," Research in Economics, Elsevier, vol. 70(4), pages 741-751.
    2. Friebel, Guido & Raith, Michael, 2016. "Managers, Training, and Internal Labor Markets," Annual Conference 2016 (Augsburg): Demographic Change 145666, Verein für Socialpolitik / German Economic Association.
    3. Koichi Kagitani & Takao Ohkawa & Makoto Okamura, 2016. "Does the Excess Entry Theorem Hold in a Differentiated Oligopoly?," Manchester School, University of Manchester, vol. 84(3), pages 340-362, June.
    4. Stephen Martin & Jan Vandekerckhove, 2013. "Market Performance Implications of the Transfer Price Rule," Southern Economic Journal, Southern Economic Association, vol. 80(2), pages 466-487, October.
    5. Raúl Bajo-Buenestado & Dodge Cahan, 2015. "Unification of Oligopolistic Markets for a Homogeneous Good in the Presence of an Antitrust Commission," Journal of Industry, Competition and Trade, Springer, vol. 15(3), pages 239-256, September.
    6. Fabrizi, Simona & Lippert, Steffen & Puppe, Clemens & Rosenkranz, Stephanie, 2016. "Manufacturer suggested retail prices, loss aversion and competition," Journal of Economic Psychology, Elsevier, vol. 53(C), pages 141-153.

    More about this item

    Keywords

    product differentiation; micro foundations; oligopoly; Cournot; endogenous sunk cost;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pur:prukra:1221. 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: (Krannert PHD). General contact details of provider: http://edirc.repec.org/data/kspurus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.