Menu Expand

Product Differentiation and the Intensity of Price Competition

Cite JOURNAL ARTICLE

Style

Baake, P., Oechssler, J. Product Differentiation and the Intensity of Price Competition. Journal of Contextual Economics – Schmollers Jahrbuch, 117(2), 247-256. https://doi.org/10.3790/schm.117.2.247
Baake, Pio and Oechssler, Jörg "Product Differentiation and the Intensity of Price Competition" Journal of Contextual Economics – Schmollers Jahrbuch 117.2, 1997, 247-256. https://doi.org/10.3790/schm.117.2.247
Baake, Pio/Oechssler, Jörg (1997): Product Differentiation and the Intensity of Price Competition, in: Journal of Contextual Economics – Schmollers Jahrbuch, vol. 117, iss. 2, 247-256, [online] https://doi.org/10.3790/schm.117.2.247

Format

Product Differentiation and the Intensity of Price Competition

Baake, Pio | Oechssler, Jörg

Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 117 (1997), Iss. 2 : pp. 247–256

Additional Information

Article Details

Baake, Pio

Oechssler, Jörg

Abstract

We consider a Hotelling-type product differentiation model with customers that are concentrated symmetrically around the center of the distribution, which seems to be a realistic assumption in many settings. We explain why a symmetric equilibrium may fail to exist. The reason is that the intensity of competition may decrease drastically when a firm moves away from its competitor. Despite the non-existence of symmetric equilibria there may exist asymmetric equilibria but those are generally characterized by strong product differentiation between the firms, with the possibility that one firm locates outside the support of the customer distribution.