Diversity and Quantity Choice in a Horizontally Differentiated Duopoly

Xiaokuai Shao ()
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Xiaokuai Shao: Tsinghua University

Journal of Industry, Competition and Trade, 2020, vol. 20, issue 4, No 4, 689-708

Abstract: Abstract The Hotelling model is extended where not only can consumers choose to buy from both sellers (multi-brand purchase), buying multiple units from one seller is also considered (within-brand multi-unit purchase). When an increase of the demand for within-brand multi-purchase exceeds a threshold: (i) firms’ strategies are switched from single-brand equilibrium with higher prices to multi-brand equilibrium with lower prices, if the incremental value from consuming an additional unit of the same product is independent of the preference for diversity; (ii) the direction of such equilibrium-switch is reversed if the two types of multi-purchase are substitutes.

Keywords: Hotelling duopoly; Multi-brand purchase; Within-brand multi-purchase; Complementarity (search for similar items in EconPapers)
JEL-codes: D4 L1 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10842-020-00337-1

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