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Oligopoly and product differentiation

In: Handbook of Game Theory and Industrial Organization, Volume I

Author

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  • Jean J. Gabszewicz
  • Ornella Tarola

Abstract

In this chapter, we survey some recent contributions analyzing oligopoly theory and product differentiation from the viewpoint of models of localized competition. In other words, we exclude from our analysis the field of monopolistic competition (see Thisse and Uschev, Chapter 5 in this Handbook) and oligopoly theory as in the neoclassical vein (Vives, 2000). We start by recalling some elements of the microeconomic theory of consumer demand based on characteristics, as introduced by Lancaster (1966). Then, we present successively the theory of horizontal product differentiation, based on the article by Hotelling (1929) and the theory of vertical product differentiation, based on the article by Gabszewicz and Thisse (1979). Then, we develop a model nesting both horizontal and vertical product differentiation (Gabszewicz and Wauthy, 2012). Finally, we propose two applications of this approach, one based on network externalities and the other on environmental economics.

Suggested Citation

  • Jean J. Gabszewicz & Ornella Tarola, 2018. "Oligopoly and product differentiation," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume I, chapter 6, pages 137-180, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:16873_6
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    Cited by:

    1. Gabszewicz, Jean J. & Marini, Marco A. & Tarola, Ornella, 2017. "Vertical differentiation and collusion: Pruning or proliferation?," Research in Economics, Elsevier, vol. 71(1), pages 129-139.
    2. Giulia Ceccantoni & Ornella Tarola & Cecilia Vergari, 2023. "Tax and pollution in a vertically differentiated duopoly: When consumers matter," Metroeconomica, Wiley Blackwell, vol. 74(2), pages 416-445, May.
    3. Gabszewicz, Jean J. & Marini, Marco A. & Tarola, Ornella, 2016. "Vertical Differentiation and Collusion: Cannibalization or Proliferation?," ETA: Economic Theory and Applications 232221, Fondazione Eni Enrico Mattei (FEEM).

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    Economics and Finance;

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