Hotelling competition with multi-purchasing

Simon Anderson, Øystein Foros and Hans Jarle Kind

No 2010/16, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: We analyze a Hotelling model where consumers either buy one out of two goods (single-purchase) or both (multi-purchase). The firms’ pricing strategies turn out to be fundamentally different if some consumers multi-purchase compared to if all single-purchase. Prices are strategic complements under single-purchase, and increase with quality. In a multi-purchase regime, in contrast, prices are strategically independent because firms then act monopolistically by pricing the incremental benefit to marginal consumers. Furthermore, prices can decrease with quality due to overlapping characteristics. Higher preference heterogeneity increases prices and profits in equilibrium with single-purchase, but decreases them with multi-purchase.

Keywords: Multi-purchase; incremental pricing; content competition (search for similar items in EconPapers)
JEL-codes: G00 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2010-12-11
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://hdl.handle.net/11250/164004 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://hdl.handle.net/11250/164004 [302 Found]--> https://www.unit.no/brage-denne-lenken-er-ikke-lenger-gyldig [301 Moved Permanently]--> https://sikt.no/brage-denne-lenken-er-ikke-lenger-gyldig)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:nhhfms:2010_016

Access Statistics for this paper

More papers in Discussion Papers from Norwegian School of Economics, Department of Business and Management Science NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by Stein Fossen ().