Spatial Equilibrium in a State Space Approach to Demand Uncertainty

Kieron Meagher and Klaus Zauner (klaus.zauner@city.ac.uk)

No 2007-19, Discussion Papers from School of Economics, The University of New South Wales

Abstract: Firms are likely to be uncertain about consumer preferences when launching products. The existing literature models preference uncertainty as an additive shock to the consumer distribution in a characteristic space model. The additive shock only shifts the mean of the consumers' ideal points. We generalize this approach to a state space model in which a vector of parameters can give rise to di erent distributions of consumer tastes in di erent states, allowing other moments of the consumer density to be uncertain. An equilibrium existence result is given. In the case of symmetric distributions, the unique subgame-perfect equilibrium can be described by a simple closed-form solution.

Keywords: Location; Product Di erentiation; Uncertainty; Hotelling (search for similar items in EconPapers)
JEL-codes: C72 D43 D81 L10 L13 R30 R39 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2007-06
New Economics Papers: this item is included in nep-mic
References: Add references at CitEc
Citations:

Downloads: (external link)
http://wwwdocs.fce.unsw.edu.au/economics/Research/WorkingPapers/2007_19.pdf (application/pdf)

Related works:
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:swe:wpaper:2007-19

Access Statistics for this paper

More papers in Discussion Papers from School of Economics, The University of New South Wales Contact information at EDIRC.
Bibliographic data for series maintained by Hongyi Li (hongyi@unsw.edu.au).