The Max-Min-Min Principle of Product Differentiation

Asim Ansari, Nicholas Economides () and Joel Steckel
Additional contact information
Asim Ansari: Graduate School of Business, Columbia University
Joel Steckel: Stern School of Business, New York University

Industrial Organization from University Library of Munich, Germany

Abstract: We analyze two and three-dimensional variants of Hotelling's model of differentiated products. In our setup, consumers can place different importance on each product attribute; this is measured by a weight in the disutility of distance in each dimension. Two firms play a two-stage game; they choose locations in stage 1 and prices in stage 2. We seek subgame-perfect equilibria. We find that all such equilibria have maximal differentiation in one dimension only; in all other dimensions, they have minimum differentiation. An equilibrium with maximal differentiation in a certain dimension occurs when consumers place sufficient importance (weight) on that attribute. Thus, depending on the importance consumers place on each attribute, in two dimensions there is a max-min equilibrium, a min-max equilibrium, or both. In three dimensions, depending on the weights, there can be a max-min-min equilibrium, a min-max-min equilibrium, a min-min-max equilibrium, any two of them, or all three.

JEL-codes: L (search for similar items in EconPapers)
Pages: 36 pages
Date: 1997-02-05
Note: Type of Document - PDF/PostScript; prepared on IBM; to print on HP; pages: 36; figures: included at the end. forthcoming, Journal of Regional Science (1997)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/9702/9702001.pdf (application/pdf)
https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/9702/9702001.ps.gz (application/postscript)

Related works:
Working Paper: The Max-Min-Min Principle of product Differentiation (1996)
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:wpa:wuwpio:9702001

Access Statistics for this paper

More papers in Industrial Organization from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).