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The Importance of the Distribution of Consumers in Horizontal Product Differentiation

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  • Antoni Calvó‐Armengol
  • Yves Zenou

Abstract

This paper examines the importance of the distribution of consumers in Hotelling’s circle on the comparison between the optimal and the market equilibrium levels of diversity. It finds that when most consumers are located very close to the firms, the result of Salop—that the equilibrium number of firms is larger than the optimal one (surplus maximizing)—can be reversed.

Suggested Citation

  • Antoni Calvó‐Armengol & Yves Zenou, 2002. "The Importance of the Distribution of Consumers in Horizontal Product Differentiation," Journal of Regional Science, Wiley Blackwell, vol. 42(4), pages 793-803.
    • Handle: RePEc:bla:jregsc:v:42:y:2002:i:4:p:793-803
    DOI: 10.1111/1467-9787.00282
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    1. Neven, Damien J., 1986. "On Hotelling's competition with non-uniform customer distributions," Economics Letters, Elsevier, vol. 21(2), pages 121-126.
    2. Jehiel, Philippe, 1992. "Product differentiation and price collusion," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 633-641, December.
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    6. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    7. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    8. Unknown, 1986. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 1(4), pages 1-9.
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    10. Bloch, Francis & Manceau, Delphine, 1999. "Persuasive advertising in Hotelling's model of product differentiation," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 557-574, May.
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    12. SHILONY, Yuval, 1981. "Hotelling's competition with general customer distributions," LIDAM Reprints CORE 457, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

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    2. Gu Yiquan & Wenzel Tobias, 2012. "Price-Dependent Demand in Spatial Models," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-26, March.
    3. Torrisi, Gianpiero, 2008. "The model of the linear city under a triangular distribution of consumers: an empirical analysis on price and location of beverage kiosks in Catania," MPRA Paper 12694, University Library of Munich, Germany.
    4. Gu, Yiquan & Rasch, Alexander & Wenzel, Tobias, 2022. "Consumer salience and quality provision in (un)regulated public service markets," Regional Science and Urban Economics, Elsevier, vol. 93(C).
    5. Simon Loertscher & Gerd Muehlheusser, 2005. "Global and local players in a model of spatial competition," Diskussionsschriften dp0511, Universitaet Bern, Departement Volkswirtschaft.
    6. Fabio Dio & Luca Correani, 2020. "Quality-improving and cost-reducing strategic alliances," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(2), pages 493-524, July.
    7. Sedghi, Nafiseh & Shavandi, Hassan & Abouee-Mehrizi, Hossein, 2017. "Joint pricing and location decisions in a heterogeneous market," European Journal of Operational Research, Elsevier, vol. 261(1), pages 234-246.
    8. Chen, Yuwen & Ni, John & Yu, Degan, 2019. "Application developers’ product offering strategies in multi-platform markets," European Journal of Operational Research, Elsevier, vol. 273(1), pages 320-333.
    9. Francisco Martínez-Sánchez, 2022. "Privatization Policies by National and Regional Governments," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 24(02), pages 1-23, June.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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