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

Arbeitspapier

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.

Object Details

• ISBN: 978-3-86788-103-6
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 92

Classification and Topics

• Classification: Wirtschaft ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Oligopoly and Other Imperfect Markets
• Subject: Demand elasticity ; spatial models ; excess entry theorem ; Produktdifferenzierung ; Monopolistischer Wettbewerb ; Preiselastizität ; Fixkosten ; Hotelling Modell ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gu, Yiquan ; Wenzel, Tobias
• Event: Veröffentlichung
• (who): Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
• (where): Essen
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/26857
• Last update: 10.03.2025, 11:42 AM CET