PRICE STRATEGY OLIGOPOLY WITH PRODUCT VARIATION*

Lloyd Shapley and Martin Shubik

Kyklos, 1969, vol. 22, issue 1, 30-44

Abstract: This article presents a mathematical model for monopolistic price competition among firms with differentiated products. The conditions which distinguish the Chamberlinian analysis from that of Edgeworth are examined. Product differentiation is not sufficient to guarantee the existence of a stable non‐cooperative equilibrium point in terms of price. The relationship among the degree of product variation, amount of capacity, and stability are examined. Explicit formulas are obtained for the non‐cooperative equilibrium and the capacity conditions for its existence. The behavior of the model as the degree of differentiation approaches zero and as competition becomes large is examined. This connects the analysis of oligopoly with the analysis of pure competition.

Date: 1969
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https://doi.org/10.1111/j.1467-6435.1969.tb02520.x

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Working Paper: Price Strategy Oligopoly with Product Variation (1967)
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