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Multi-dimensional Product Differentiation and Price Competition

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  • Caplin, Andrew S
  • Nalebuff, Barry J

Abstract

The authors present a framework for analyzi ng the design and pricingof differentiated products. Their approach has two nov el features. Individuals have Cobb-Douglas preferences over multidimensional pro duct characteristics. The distribution of Cobb-Douglas parameters across society is concave: this implies that there is general agreement about which characteri stic mix is most desirable. With these assumptions the authors demonstrate exist ence of a pure strategy price equilibrium for arbitrary pairs of products in two dimensions and also show how raising the dimensionality of the product space pr ovides an advantage to a late entrant in a price- regulated duopoly. Copyright 1986 by Royal Economic Society.

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  • Caplin, Andrew S & Nalebuff, Barry J, 1986. "Multi-dimensional Product Differentiation and Price Competition," Oxford Economic Papers, Oxford University Press, vol. 38(0), pages 129-145, Suppl. No.
    • Handle: RePEc:oup:oxecpp:v:38:y:1986:i:0:p:129-45
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    Cited by:

    1. Marcella Scrimitore, 2003. "Symmetric and Asymmetric Equilibria in a Spatial Duopoly," ERSA conference papers ersa03p194, European Regional Science Association.
    2. James Levinsohn, 1988. "Empirics of Taxes on Differentiated Products: The Case of Tariffs in the U.S. Automobile Industry," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 9-44, National Bureau of Economic Research, Inc.
    3. Gábor Péli & Arjen van Witteloostuijn, 2009. "Optimal monopoly market area spanning in multidimensional commodity spaces," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 1-14.
    4. Olivier Compte, 2023. "Endogenous Barriers to Learning," Papers 2306.16904, arXiv.org.
    5. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.

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