Price responses to market entry with and without endogenous product choice

  • Textbook wisdom says that competition yields lower prices and higher consumer surplus than monopoly. We show in two versions of a simple location-product differentiation model with and without endogenous choice of products that these two results have to be qualified. In both models, more than half of the reasonable parameter values lead to higher prices with duopoly than with monopoly. If the product characteristics are exogenous to the firms, consumers may even be be better off with monopoly in average.

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Metadaten
Author details:Helge SannerGND
URN:urn:nbn:de:kobv:517-opus-14399
Publication series (Volume number):Volkswirtschaftliche Diskussionsbeiträge (81)
Publication type:Working Paper
Language:English
Publication year:2005
Publishing institution:Universität Potsdam
Release date:2007/06/22
RVK - Regensburg classification:QD 300
Organizational units:Wirtschafts- und Sozialwissenschaftliche Fakultät / Wirtschaftswissenschaften
DDC classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
External remark:Sanner, Helge: Price responses to market entry with and without endogenous product choice / Helge Sanner. - Potsdam : Univ., 2005. - 22 Bl. : graph. Darst.
(Volkswirtschaftliche Diskussionsbeiträge : Diskussionsbeitrag ; 81)
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