Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

Equilibrium Product Lines: Competing Head-to-Head May be Less Competitive

Paul Klemperer
The American Economic Review
Vol. 82, No. 4 (Sep., 1992), pp. 740-755
Stable URL: http://www.jstor.org/stable/2117342
Page Count: 16
  • Download ($10.00)
  • Subscribe ($19.50)
  • Cite this Item
Equilibrium Product Lines: Competing Head-to-Head May be Less Competitive
Preview not available

Abstract

I suggest a new model of demand for variety that explains why competing firms may choose very similar product lines: if firms offer different product ranges, some consumers use multiple suppliers to increase variety, and since these consumers' purchases will be sensitive to the difference in firms' prices, the market may be fairly competitive. If, instead, firms offer identical product ranges, each consumer purchases from one firm only, because of costs of using additional suppliers, so the market may be less competitive and equilibrium prices higher. This contrasts with the standard intuition that firms minimize competition by differentiating their products.

Page Thumbnails

  • Thumbnail: Page 
740
    740
  • Thumbnail: Page 
741
    741
  • Thumbnail: Page 
742
    742
  • Thumbnail: Page 
743
    743
  • Thumbnail: Page 
744
    744
  • Thumbnail: Page 
745
    745
  • Thumbnail: Page 
746
    746
  • Thumbnail: Page 
747
    747
  • Thumbnail: Page 
748
    748
  • Thumbnail: Page 
749
    749
  • Thumbnail: Page 
750
    750
  • Thumbnail: Page 
751
    751
  • Thumbnail: Page 
752
    752
  • Thumbnail: Page 
753
    753
  • Thumbnail: Page 
754
    754
  • Thumbnail: Page 
755
    755