Catalog competition in Hotelling's duopoly

Concurrence en catalogue dans le duopole d'Hotelling

Pierre Fleckinger (pierre.fleckinger@minesparis.psl.eu) and Thierry Lafay (tlafay@univ-paris1.fr)
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Thierry Lafay: UP1 - Université Paris 1 Panthéon-Sorbonne

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Abstract: We study a duopoly on a market with horizontal differentiation where firms compete in catalog : firms choose a price and a location in the consumer' space. Whereas there is no equilibrium in pure strategy for the simultaneous game, we show that an equilibrium always exists in a sequential competition. In this subgame perfect equilibrium the leader chooses a more specific product at a lower price than the follower. Thus the leader earns finally less than the follower. This introduces a tension between the temptation of attrition, which leads to an unstable configuration, and the will to guarantee a stricly positive profit.

Date: 2005-09-15
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Published in 54. Congrès annuel de l'AFSE, Sep 2005, Paris, France

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Working Paper: Catalog competition in Hotelling's duopoly (2006)
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