Single-price equilibrium with product differentiation: Effects of entry

This paper discusses the effects of entry in a single-price equilibrium with product differentiation. Product differentiation is viewed mainly from consumer preferences and valuations, which in turn are expressed in consumers' perceived prices. The model includes varying consumer preferences an...

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Bibliographic Details
Published in:Journal of economic behavior & organization 1993, Vol.20 (1), p.79-97
Main Author: Hung, Chao-Shun
Format: Article
Language:English
Subjects:
Consumption function
Economic theory
Impacts
Market entry
Market equilibrium
Prices
Product differentiation
Profits
Online Access:Get full text
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Summary:This paper discusses the effects of entry in a single-price equilibrium with product differentiation. Product differentiation is viewed mainly from consumer preferences and valuations, which in turn are expressed in consumers' perceived prices. The model includes varying consumer preferences and valuations in a preferred brand. Within this simplified framework, the paper shows that, under certain types of individual demands, entry into stable equilibria may result in higher prices. The effects of entry on profits are also discussed.
ISSN:0167-2681
1879-1751
DOI:10.1016/0167-2681(93)90082-Z