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On Stability in Competition: Tying and Horizontal Product Differentiation

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  • Alain Egli

Abstract

We combine Hotelling’s model of product differentiation with tie-in sales. A monopolist in one market competes with another firm in a second market. In equilibrium firms choose zero product differentiation. Due to the tying structure no firm can gain the whole market by a small price reduction. A differentiation effect due to tie-in sales leads to this equilibrium stability. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • 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.
    • Handle: RePEc:kap:revind:v:30:y:2007:i:1:p:29-38
    DOI: 10.1007/s11151-007-9127-y
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    References listed on IDEAS

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    Cited by:

    1. Alessandro Avenali & Anna D’Annunzio & Pierfrancesco Reverberi, 2013. "Bundling, Competition and Quality Investment: A Welfare Analysis," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(3), pages 221-241, November.
    2. Angelika Endres & Joachim Heinzel, 2019. "The Impact of Product Qualities on Downstream Bundling in a Distribution Channel," Working Papers CIE 127, Paderborn University, CIE Center for International Economics.
    3. Andrea Mantovani, 2013. "The Strategic Effect of Bundling: A New Perspective," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(1), pages 25-43, February.
    4. Angelika Endres-Fröhlich & Joachim Heinzel, 2022. "The Impact of Product Qualities on Downstream Bundling in a Distribution Channel," Working Papers Dissertations 90, Paderborn University, Faculty of Business Administration and Economics.
    5. Buechel, Berno & Klein, Jan, 2014. "Do Consumers' Preferences Really Matter? - A Note on Spatial Competition with Restricted Strategies," MPRA Paper 55288, University Library of Munich, Germany.
    6. Angelika Endres & Joachim Heinzel, 2019. "The Impact of Product Qualities on Downstream Bundling in a Distribution Channel," Working Papers CIE 124, Paderborn University, CIE Center for International Economics.
    7. Angelika Endres-Fröhlich & Burkhard Hehenkamp & Joachim Heinzel, 2022. "The Impact of Product Differentiation on Retail Bundling in a Vertical Market," Working Papers Dissertations 91, Paderborn University, Faculty of Business Administration and Economics.
    8. Begoña Garcia Mariñoso & Xavier Martínez-Giralt & Pau Olivella, 2008. "Bundling in Telecommunications," Working Papers 356, Barcelona School of Economics.
    9. Joachim Heinzel, 2019. "Bundling in a Distribution Channel with Retail Competition," Working Papers CIE 120, Paderborn University, CIE Center for International Economics.

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    More about this item

    Keywords

    Horizontal product differentiation; Hotelling; Tie-in sales; Equilibrium existence; D43; L10; L11; L13;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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