Fringe firms: Are they better off in a heterogeneous market?

Susanne Wied-Nebbeling

No 31, Working Paper Series in Economics from University of Cologne, Department of Economics

Abstract: This paper analyzes a market with three firms. One of them is the dominant firm and the two others are fringe firms. The formulation of demand allows a comparison between price competition with heterogeneous and homogeneous products. Because a parameterization is required to assure that market size is the same in both scenarios, no general conclusions can be drawn. But it can be shown that in large markets with relatively inelastic demand for the fringe firms’ products and a cost advantage of the dominant firm, the fringe firms are better off if they produce a heterogeneous product.

Keywords: dominant firm; competitive fringe; price competition; heterogeneous products (search for similar items in EconPapers)
JEL-codes: L11 L13 (search for similar items in EconPapers)
Date: 2007-06-26
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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