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Diversity and Quantity Choice in a Horizontally Differentiated Duopoly

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  • Xiaokuai Shao

    (Tsinghua University)

Abstract

The Hotelling model is extended where not only can consumers choose to buy from both sellers (multi-brand purchase), buying multiple units from one seller is also considered (within-brand multi-unit purchase). When an increase of the demand for within-brand multi-purchase exceeds a threshold: (i) firms’ strategies are switched from single-brand equilibrium with higher prices to multi-brand equilibrium with lower prices, if the incremental value from consuming an additional unit of the same product is independent of the preference for diversity; (ii) the direction of such equilibrium-switch is reversed if the two types of multi-purchase are substitutes.

Suggested Citation

  • Xiaokuai Shao, 2020. "Diversity and Quantity Choice in a Horizontally Differentiated Duopoly," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 689-708, December.
    • Handle: RePEc:kap:jincot:v:20:y:2020:i:4:d:10.1007_s10842-020-00337-1
    DOI: 10.1007/s10842-020-00337-1
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    References listed on IDEAS

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    More about this item

    Keywords

    Hotelling duopoly; Multi-brand purchase; Within-brand multi-purchase; Complementarity;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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