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Hotelling Duopoly with Uninformed Consumers

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  • Polo, Michele

Abstract

This paper analyzes price competition in a duopoly a la H. Hotelling in which perfectly and different types of imperfectly informed consumers coexist. If some consumers don't observe prices, the equilibrium price tends to rise above the full information level; moreover, price dispersion can occur in equilibrium. Both results are in accordance with the literature on this issue. However, if consumers observe prices but not varieties, the equilibrium prices tend to fall below the full information level. Finally, in this latter case, not all the consumers are better off when the market moves to full information. Copyright 1991 by Blackwell Publishing Ltd.

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  • Polo, Michele, 1991. "Hotelling Duopoly with Uninformed Consumers," Journal of Industrial Economics, Wiley Blackwell, vol. 39(6), pages 701-715, December.
    • Handle: RePEc:bla:jindec:v:39:y:1991:i:6:p:701-15
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    Cited by:

    1. Schlatterer, Markus & Saur, Marc & Schmitt, Stefanie, 2019. "Horizontal product differentiation with limited attentive consumers," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203571, Verein für Socialpolitik / German Economic Association.
    2. Saur, Marc P. & Schlatterer, Markus G. & Schmitt, Stefanie Y., 2022. "Limited perception and price discrimination in a model of horizontal product differentiation," Games and Economic Behavior, Elsevier, vol. 134(C), pages 151-168.
    3. Ofer H Azar, 2015. "A Linear City Model with Asymmetric Consumer Distribution," PLOS ONE, Public Library of Science, vol. 10(6), pages 1-13, June.
    4. Ellingsen, Tore, 1995. "Long Term Contracts, Arbitrage, and Vertical Restraints," SSE/EFI Working Paper Series in Economics and Finance 58, Stockholm School of Economics.
    5. Hofmann, Annette & Nell, Martin, 2008. "The impact of intermediary remuneration in differentiated insurance markets," Working Papers on Risk and Insurance 22, University of Hamburg, Institute for Risk and Insurance.
    6. Rajiv D. Banker & Inder Khosla & Kingshuk K. Sinha, 1998. "Quality and Competition," Management Science, INFORMS, vol. 44(9), pages 1179-1192, September.
    7. Braid, Ralph M., 1998. "Spatial price competition when stores are not certain to have what consumers want," Regional Science and Urban Economics, Elsevier, vol. 28(2), pages 143-161, March.
    8. Saur, Marc P. & Schlatterer, Markus G. & Schmitt, Stefanie Yvonne, 2019. "Horizontal product differentiation with limited attentive consumers," BERG Working Paper Series 143, Bamberg University, Bamberg Economic Research Group.
    9. Okura Mahito, 2010. "An Equilibrium Analysis of the Insurance Market with Horizontal Differentiation," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 4(2), pages 1-24, July.

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