The Competitive Effects of Price-Floors

V Bhaskar and Andrews KY16 9AL UK

Industrial Organization from EconWPA

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.

Keywords: product differentiation; vertical restraints (search for similar items in EconPapers)
JEL-codes: L13 L15 L42 (search for similar items in EconPapers)
Date: Written 1996-09-02
Note: Type of Document - Scientific Word generated DVI file; prepared on Pc compatible; to print on any; pages: 28; figures: request from author
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Related works:
Journal Article: The Competitive Effects of Price-Floors (1997)
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