Product Differentiation and Market Power

E. Dierker and H. Dierker
Authors registered in the RePEc Author Service: Egbert Dierker

Working Papers from Washington St. Louis - School of Business and Political Economy

Abstract: Assuming asymmetry across firms and constant unit costs Perloff and Salop (1985) show: If product differentiation increases, the prices rise in a symmetric equilibrium. This raise the question of whether, in general, more product differentiation leads to higher market prices. Giving up the symmetry and the constant unit costs assumptions we present examples in which at least one firm lowers its equilibrium price when product differentiation increases. We formulate a model of product differentiation and state and discuss, within the theory of supermodular games, conditions ensuring that all firms raise their prices in a Nash equilibrium if product differentiation increases.

Keywords: ENTERPRISES; PRICES; PRODUCTS (search for similar items in EconPapers)
JEL-codes: C70 L10 L11 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:fth:waslbp:9804

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