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A Generalized Model of Horizontal Product Differentiation

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  • Bockem, Sabine

Abstract

A famous result in the literature on horizontal product differentiation is due to C. d'Aspremont, J. J. Gabszewicz, and J. F. Thisse (1979). They show that, in a slightly modified Hotelling model, profit-maximizing firms choose maximum instead of minimum differentiation. The aim of this paper is to show that the result of maximum differentiation is not robust. The author provides provide an example for a wide class of markets where firms will choose interior solutions if consumers have an outside option for their use of money. Copyright 1994 by Blackwell Publishing Ltd.

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  • Bockem, Sabine, 1994. "A Generalized Model of Horizontal Product Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 287-298, September.
    • Handle: RePEc:bla:jindec:v:42:y:1994:i:3:p:287-98
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    Cited by:

    1. Vermeulen, Ben & La Poutré, Han & de Kok, Ton, 2012. "Dynamics and equilibria under incremental horizontal differentiation on the Salop circle," MPRA Paper 51449, University Library of Munich, Germany.
    2. Martin Peitz, 1999. "A difficulty with the address models of product differentiation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 14(3), pages 717-727.
    3. Yongmin Chen & Michael H. Riordan, 2008. "Price‐increasing competition," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1042-1058, December.
    4. Matteo Bassi & Marco Pagnozzi & Salvatore Piccolo, 2015. "Product Differentiation by Competing Vertical Hierarchies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(4), pages 904-933, October.
    5. Lisa George & Joel Waldfogel, 2000. "Who Benefits Whom in Daily Newspaper Markets?," NBER Working Papers 7944, National Bureau of Economic Research, Inc.
    6. Alain Egli, 2007. "On Stability in Competition: Tying and Horizontal Product Differentiation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(1), pages 29-38, February.

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