Horizontal differentiation and price competition with sequential entry

Pierre Fleckinger () and Thierry Lafay ()
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Pierre Fleckinger: CECO - Laboratoire d'économétrie de l'École polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique

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Abstract: We study a class of differentiation games à la Hotelling. Two firms choose a price and a location in the consumers' space. The leader first chooses both variables, and the follower observes them before playing. It is shown that in such games, any equilibrium has the property that the follower always gets a greater profit (in the absence of entry barrier). An equilibrium is shown to always exist with linear costs and we qualify the equilibria with respect to the willingness to pay for the family of products. Some extensions are looked at. In particular, we investigate the effect of entry barriers on the strategies of the leader.

Keywords: Différenciation horizontale; Engagement en prix; Compétition en catalogue; Jeux séquentiel; Horizontal differentiation; Price commitment; Catalog competition sequential moves (search for similar items in EconPapers)
Date: 2003
Note: View the original document on HAL open archive server: https://hal.science/hal-00243021v1
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