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Catalog Competition: Equilibrium Characterization and experimental evidence

Author

Listed:
  • Dimitrios Xefteris

    (Dept. of Economics, University of Cyprus, Cyprus)

  • Iván Barreda-Tarrazona

    (LEE & Economics Department, Universitat Jaume I, Castellón-Spain)

  • Aurora García-Gallego

    (LEE & Economics Department, Universitat Jaume I, Castellón-Spain)

  • Nikolaos Georgantzis

    (Burgundy School of Wines and Spirits Business, Dijon-France and LEE-Universitat Jaume I, Castellón-Spain)

Abstract

This paper studies a catalog competition game: two competing rms decide at the same time product characteristics and prices in order to maximize pro ts. In the unique symmetric equilibrium of this one-stage Hotelling (1929) game, rms employ mixed strategies which make them produce more often a mainstream product variety than any of the specialized ones and always charge higher prices than their marginal costs (also, prices for mainstream products are found to be lower than prices for specialized products). We experimentally test and con rm the main predictions of the model, and we also compare it to the rst-location-then-pricing original setup.

Suggested Citation

  • Dimitrios Xefteris & Iván Barreda-Tarrazona & Aurora García-Gallego & Nikolaos Georgantzis, 2018. "Catalog Competition: Equilibrium Characterization and experimental evidence," Working Papers 2018/08, Economics Department, Universitat Jaume I, Castellón (Spain).
    • Handle: RePEc:jau:wpaper:2018/08
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    References listed on IDEAS

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    More about this item

    Keywords

    catalog competition; Hotelling; mixed equilibrium; experiment;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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