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Existence and uniqueness of price equilibria in location-based models of differentiation with full coverage.
- Source :
- Journal of Economics; Jul2022, Vol. 136 Issue 2, p115-148, 34p
- Publication Year :
- 2022
-
Abstract
- In location-based models of price competition, traditional sufficient conditions for existence and uniqueness of an equilibrium (Caplin and Nalebuff in Econometrica 59(1):25–59) are not robust for the firm that serves the right-tail of the consumers' distribution. Interestingly, as we relax these conditions, we observe only two new alternative cases. Moreover, we identify a novel, easily testable condition for uniqueness that is weaker than log-concavity and that can also apply to Mechanism Design. Thanks to this general framework, we can solve the equilibrium of general vertical differentiation models numerically and show that inequality has a U-shaped effect on profits and prices of a high-quality firm. Moreover, we prove that extreme levels of concentration can dissolve natural monopolies and restore competition, contrary to the Uniform case. [ABSTRACT FROM AUTHOR]
- Subjects :
- EQUILIBRIUM
MONOPOLIES
PRODUCT positioning
Subjects
Details
- Language :
- English
- ISSN :
- 09318658
- Volume :
- 136
- Issue :
- 2
- Database :
- Complementary Index
- Journal :
- Journal of Economics
- Publication Type :
- Academic Journal
- Accession number :
- 157261939
- Full Text :
- https://doi.org/10.1007/s00712-021-00770-8