A Generalized Model of Horizontal Product Differentiation

Sabine Bockem

Journal of Industrial Economics, 1994, vol. 42, issue 3, 287-98

Abstract: A famous result in the literature on horizontal product differentiation is due to C. d'Aspremont, J. J. Gabszewicz, and J. F. Thisse (1979). They show that, in a slightly modified Hotelling model, profit-maximizing firms choose maximum instead of minimum differentiation. The aim of this paper is to show that the result of maximum differentiation is not robust. The author provides provide an example for a wide class of markets where firms will choose interior solutions if consumers have an outside option for their use of money. Copyright 1994 by Blackwell Publishing Ltd.

Date: 1994
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