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Product Variety, Price Elasticity of Demand and Fixed Cost in Spatial Models

SSRN Electronic Journal
2009
  • 3
    Citations
  • 1,249
    Usage
  • 2
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    3
    • Citation Indexes
      3
  • Usage
    1,249
    • Abstract Views
      1,162
    • Downloads
      87
  • Captures
    2
  • Ratings
    • Download Rank
      590,706

Article Description

This paper explores the implications of price-dependent demand in spatial models of product differentiation. We introduce consumers with a quasi-linear utility function in the framework of the Salop (1979) model. We show that the so-called excess entry theorem relies critically on the assumption of completely inelastic demand. Our model is able to produce excessive, insufficient, or optimal product variety. A proof for the existence and uniqueness of symmetric equilibrium when price elasticity of demand is increasing in price is also provided.

Bibliographic Details

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