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Equilibrium with Product Differentiation

Equilibrium with Product Differentiation Abstract A model of product differentiation which combines elements of both spatial and representative consumer formulations is used to examine the properties of single- and multiple-price equilibria. Conditions under which decreases in the intensity of consumer preferences reduce price are given. It is shown that, with certain types of demand curves, entry can eliminate price-cost markups even given product differentiation. If competition is localized, it is demonstrated that entry does not affect the markup. Finally, the effect of spurious product differentiation on price is examined. This content is only available as a PDF. Author notes The authors wish to thank B. Allen, H. Beales, P. Berck, D. Cass, D. Crawford, J. Galambos, S. Grossman, O. Hart, M. Katz, R. Porter, K. Roberts, T. Romer, M. Rothschild, D. Sant, D. Scheffman, an anonymous referee, and especially R. Willig for useful discussions and advice. © 1985 The Society for Economic Analysis Limited http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Economic Studies Oxford University Press

Equilibrium with Product Differentiation

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References (18)

Publisher
Oxford University Press
Copyright
© 1985 The Society for Economic Analysis Limited
ISSN
0034-6527
eISSN
1467-937X
DOI
10.2307/2297473
Publisher site
See Article on Publisher Site

Abstract

Abstract A model of product differentiation which combines elements of both spatial and representative consumer formulations is used to examine the properties of single- and multiple-price equilibria. Conditions under which decreases in the intensity of consumer preferences reduce price are given. It is shown that, with certain types of demand curves, entry can eliminate price-cost markups even given product differentiation. If competition is localized, it is demonstrated that entry does not affect the markup. Finally, the effect of spurious product differentiation on price is examined. This content is only available as a PDF. Author notes The authors wish to thank B. Allen, H. Beales, P. Berck, D. Cass, D. Crawford, J. Galambos, S. Grossman, O. Hart, M. Katz, R. Porter, K. Roberts, T. Romer, M. Rothschild, D. Sant, D. Scheffman, an anonymous referee, and especially R. Willig for useful discussions and advice. © 1985 The Society for Economic Analysis Limited

Journal

The Review of Economic StudiesOxford University Press

Published: Jan 1, 1985

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