Multi-product Bertrand Oligopoly with Exogenous and Endogenous Consumer Heterogeneity

Dan Bernhardt and Graham Brett ()
Additional contact information
Graham Brett: Wang Yanan Institute for Studies in Economics, Xiamen University, 422 Siming South Road, Siming, Xiamen, Fujian Province, 361006 China

The B.E. Journal of Theoretical Economics, 2015, vol. 15, issue 2, 167-209

Abstract: We develop a spatial model in which consumers receive firm-specific location shocks and firms endogenously determine both franchise/product locations and prices. Remarkably, firms fail to profit from endogenous product-specific heterogeneity alone: while ex-post consumer heterogeneity ensures positive gross profits, competition for market share results in socially excessive product lines and zero net profits. With added exogenous taste heterogeneity, endogenous spatial heterogeneity drives profits below their levels with only taste heterogeneity. Finally, we introduce multiple product lines and show that when product costs differ across lines, firms earn positive profits as long as consumer preferences over lines are imperfectly correlated.

Keywords: spatial modeling; product line competition; endogenous location; spatial heterogeneity; taste heterogeneity; franchising (search for similar items in EconPapers)
JEL-codes: L1 L11 L13 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/bejte-2014-0031 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

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:bpj:bejtec:v:15:y:2015:i:2:p:167-209:n:9

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejte/html

DOI: 10.1515/bejte-2014-0031

Access Statistics for this article

The B.E. Journal of Theoretical Economics is currently edited by Burkhard C. Schipper

More articles in The B.E. Journal of Theoretical Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().