A model of multiproduct price competition

Amparo Urbano, Junichi Watanabe and Yair Tauman ()
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Junichi Watanabe: Dpt. Economics

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: Strategic interaction in oligopolistic markets has been extensively studied in the literature. This literature deals mostly with the case of multiple firms which produce a homogeneous good or goods that are perfect substitutes. In this paper we provide a simple model of price competition in a multiproduct oligopoly market. We find that apure strategy equilibrium exists and that the equilibrium consumption sets are efficient since they maximize the total social surplus. If the willingness to pay function of the consumer is convex, the set of equilibrium prices coincides with the core of a related game and the firms extract total industry surplus. If it is concave, the only equilibrium price of a product is its marginal contribution to the consumer's total willingness to pay. If the products are perfect substitutes we obtain the standard Bertrand equilibrium.

Keywords: Multiproduct oligopolistic competition; efficient consumption sets (search for similar items in EconPapers)
Pages: 52 pages
Date: 1996-07
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Related works:
Journal Article: A Model of Multiproduct Price Competition (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:1996-07

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