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CHOICE OF PRODUCT TYPE BY STRATEGICALLY INTERDEPENDENT FIRMS
Author(s) -
Gee J. M. Alec
Publication year - 1996
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.1467-9485.1996.tb00671.x
Subject(s) - tacit collusion , product differentiation , microeconomics , interdependence , economics , product (mathematics) , collusion , nash equilibrium , product type , product market , product proliferation , new product development , industrial organization , cournot competition , product management , mathematics , computer science , incentive , programming language , geometry , political science , management , law
A stract The paper analyses the degree of product differentiation between sigle product firms in alternative market equilibria. The equilibria are stable in the sense of Nash, and both non‐cooperative and tacitly collusive market outcomesare identified. The basic model follows the ‘address’ aproach to product differentiation, and the firms' strategic variables are choice of product type and price charged. When all firms are non‐cooperative, product gaps between firms are equal; but tacit collusion results in product gap variation between firms in Nash equilibrium. In all cases, profits for any firm are assumed to be proportional to the multiple of the product gaps between that firm and each of its two closest rivals.