Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Friday, May 22, 2009

Monopolistic Competition Between Differentiated Products with Demand for More Than One Variety

Posted by D. Daniel Sokol

Andrei Hagiu, Harvard Business School analyzes Monopolistic Competition Between Differentiated Products with Demand for More Than One Variety.

ABSTRACT: We analyze the existence of pure strategy symmetric price equilibria in a generalized version of Salop (1979)'s circular model of competition between differentiated products - namely, we allow consumers to purchase more than one brand. When consumers purchase all varieties from which they derive non-negative net utility, there is no competition, so that each firm behaves like an unconstrained monopolist. When each consumers is interested in purchasing an exogenously given number (n) of varieties, we show that there is no pure strategy symmetric price equilibrium in general (for n > 2 with linear transportation costs). In turn, if the limitation on the number of varieties consumers purchase comes from a budget constraint then we obtain a multiplicity of symmetric price equilibria, which can be indexed by the number of varieties consumers purchase in equilibrium.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/05/monopolistic-competition-between-differentiated-products-with-demand-for-more-than-one-variety.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0115708795ee970b

Listed below are links to weblogs that reference Monopolistic Competition Between Differentiated Products with Demand for More Than One Variety:

Comments

Post a comment