Antitrust & Competition Policy Blog

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

A Member of the Law Professor Blogs Network

Thursday, September 3, 2009

Firm entry, product repositioning and welfare

Posted by D. Daniel Sokol

Eleftherios Zacharias (Athens University - Econ) has posted Firm entry, product repositioning and welfare.

ABSTRACT: We show that the entry of a second firm in a horizontally differentiated market (ala Hotelling) may harm consumers as prices increase and consumer's surplus possibly decrease. We first derive the price and the consumer's surplus of a monopoly which is located at the center of the market. When a second firm enters the market the first firm repositions and the two firms locate at their equilibrium points. Although competition adds to variety and increases consumer's surplus, the post entry increase in price may outweigh the gains from extra variety and make consumers worse off.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/09/firm-entry-product-repositioning-and-welfare-.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0120a58ea3cd970c

Listed below are links to weblogs that reference Firm entry, product repositioning and welfare :

Comments

Post a comment