IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpio/9609001.html
   My bibliography  Save this paper

The Competitive Effects of Price-Floors

Author

Listed:
  • V. Bhaskar

    (Dept. of Economics University of St. Andrews St.)

  • Andrews KY16 9AL UK

Abstract

We analyze the effects of a legally-binding price floor using Hotelling's model of locational competition. A moderate price-floor destroys the maximal differentiation equilibrium of d'Aspremont et. al., by allowing firms to compete more aggressively for market share. Minimum differentiation results, with lower equilibrium prices. A low price floor results in mulitiple equilibria - both minimum and maximum differentiation are possible.

Suggested Citation

  • V. Bhaskar & Andrews KY16 9AL UK, 1996. "The Competitive Effects of Price-Floors," Industrial Organization 9609001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpio:9609001
    Note: Type of Document - Scientific Word generated DVI file; prepared on Pc compatible; to print on any; pages: 28; figures: request from author
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/9609/9609001.pdf
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/9609/9609001.dvi
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/9609/9609001.ps.gz
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, April.
    2. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-366, May.
    3. Bester, Helmut & de Palma, Andre & Leininger, Wolfgang & Thomas, Jonathan & von Thadden, Ernst-Ludwig, 1996. "A Noncooperative Analysis of Hotelling's Location Game," Games and Economic Behavior, Elsevier, vol. 12(2), pages 165-186, February.
    4. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stefan Roth, 1999. "Möglichkeiten und Grenzen ökonomischer Positionierungsmodelle," Schmalenbach Journal of Business Research, Springer, vol. 51(3), pages 243-266, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Magnus Hoffmann & Grégoire Rota‐Graziosi, 2020. "Endogenous timing in the presence of non‐monotonicities," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 359-402, February.
    2. Ishida, Junichiro & Matsushima, Noriaki, 2004. "A noncooperative analysis of a circular city model," Regional Science and Urban Economics, Elsevier, vol. 34(5), pages 575-589, September.
    3. Gaëtan Fournier & Marco Scarsini, 2014. "Hotelling Games on Networks: Efficiency of Equilibria," Documents de travail du Centre d'Economie de la Sorbonne 14033, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    4. Kurt R. Brekke & Robert Nuscheler & Odd Rune Straume, 2006. "Quality and Location Choices under Price Regulation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 207-227, March.
    5. Herr Annika, 2011. "Quality and Welfare in a Mixed Duopoly with Regulated Prices: The Case of a Public and a Private Hospital," German Economic Review, De Gruyter, vol. 12(4), pages 422-437, December.
    6. Krol Michal, 2011. "On the Existence and Social Optimality of Equilibria in a Hotelling Game with Uncertain Demand and Linear-Quadratic Costs," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-22, March.
    7. Aguirre, Inaki & Espinosa, Maria Paz & Macho-Stadler, Ines, 1998. "Strategic entry deterrence through spatial price discrimination," Regional Science and Urban Economics, Elsevier, vol. 28(3), pages 297-314, May.
    8. Etro, Federico, 2016. "Research in economics and industrial organization," Research in Economics, Elsevier, vol. 70(4), pages 511-517.
    9. Scott M. Gilpatric & Youping Li, 2021. "Endogenous Price Leadership and Product Positioning," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(2), pages 287-302, March.
    10. Konishi, Hideo, 2005. "Concentration of competing retail stores," Journal of Urban Economics, Elsevier, vol. 58(3), pages 488-512, November.
    11. Drezner, Zvi & Eiselt, H.A., 2024. "Competitive location models: A review," European Journal of Operational Research, Elsevier, vol. 316(1), pages 5-18.
    12. Pierre Fleckinger & Thierry Lafay, 2003. "Horizontal differentiation and price competition with sequential entry," Working Papers hal-00243021, HAL.
    13. Sallstrom Matthews, S.E., 2007. "The Principle of Moderate Differentiation," Cambridge Working Papers in Economics 0720, Faculty of Economics, University of Cambridge.
    14. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, September.
    15. Pierre Fleckinger & Thierry Lafay, 2006. "Concurrence en catalogue dans le duopole d'Hotelling," Revue économique, Presses de Sciences-Po, vol. 57(3), pages 573-581.
    16. Galeotti, Andrea & Moraga-González, José Luis, 2008. "Segmentation, advertising and prices," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1106-1119, September.
    17. Kretschmer, Tobias & Rösner, Mariana, 2010. "Increasing Dominance - the Role of Advertising, Pricing and Product Design," Discussion Papers in Business Administration 11500, University of Munich, Munich School of Management.
    18. Kieron Meagher & Arghya Ghosh, 2004. "Political Economy of Infrastructure Investment: A Spatial Approach," Econometric Society 2004 North American Summer Meetings 561, Econometric Society.
    19. Kuninori Nakagawa, 2023. "Horizontal product differentiation in Varian’s model of sales," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(2), pages 607-627, June.
    20. Azamat Valei, 2017. "Advertising Response to New Entry," CERGE-EI Working Papers wp588, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

    More about this item

    Keywords

    product differentiation; vertical restraints;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:9609001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.