Oligopoly and Luce's Choice Axiom

Simon Anderson and André de Palma ()

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We apply Luce's choice axiomatic framework to oligopoly pricing of quality differentiated goods. The demand system is a probabilistic comparison of surpluses across products. Zero demands arise naturally, in contrast to the related CES and Mixed Logit models. With asymmetric products, high mark-ups and high demands are driven by high quality-costs. The oligopoly price equilibrium delivers a simple surplus-split property. We reconcile the model with standard consumer theory by introducing income, and hence generate a representative consumer formulation, which has a quadratic form in a central case. We further introduce a preference representation based on the Gabszewicz-Thisse vertical quality formulation.

Keywords: Choice Axiom; Probabilistic choice models; Oligopoly; Pricing; Representative consumer (search for similar items in EconPapers)
Date: 2012-11
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published in Regional Science and Urban Economics, 2012, 42 (6), pp.1053-1060. ⟨10.1016/j.regsciurbeco.2011.10.002⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Oligopoly and Luce's Choice Axiom (2012)
Working Paper: Oligopoly and Luce's Choice Axiom (2012)
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:hal:cesptp:hal-00820690

DOI: 10.1016/j.regsciurbeco.2011.10.002

Access Statistics for this paper

More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
Bibliographic data for series maintained by CCSD ().