The Competitive Effects of Price-Floors

V Bhaskar

Journal of Industrial Economics, 1997, vol. 45, issue 3, pages 329-40

Abstract: Using Hotelling's model of locational competition, the author shows that a moderate price floor destroys the maximal differentiation equilibrium, resulting in minimum differentiation. Equilibrium prices are lower than prices in the absence of a floor. A low price floor can lead to multiple equilibria, with both minimum and maximum differentiation as possible outcomes. Copyright 1997 by Blackwell Publishing Ltd

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