Please use this identifier to cite or link to this item: https://doi.org/10.1016/S0899-8256(02)00561-4
Title: Nonminimal product differentiation as a bargaining outcome
Authors: Rath, K.P.
Zhao, G. 
Issue Date: Feb-2003
Citation: Rath, K.P., Zhao, G. (2003-02). Nonminimal product differentiation as a bargaining outcome. Games and Economic Behavior 42 (2) : 267-280. ScholarBank@NUS Repository. https://doi.org/10.1016/S0899-8256(02)00561-4
Abstract: It is well known that in a duopoly model of product choice with quadratic transportation cost, the firms locate at the extreme endpoints of the market. Jehiel (1992, Int. J. Ind. Organ, 10, 633-641) has examined this model in an infinite horizon setting where in the initial period the firms choose location and in subsequent periods charge the Nash bargaining solution prices. Then, in the unique equilibrium both firms locate at the center of the market. This paper examines the case when the firms instead charge the prices determined by either the egalitarian bargaining solution or the Kalai-Smorodinski bargaining solution. It is shown that central agglomeration is an equilibrium. Furthermore, there is a continuum of symmetric equilibria in addition where the firms locate apart from each other. So the products are not necessarily minimally differentiated. Thus different bargaining solutions provide quite different outcomes. © 2003 Elsevier Science (USA). All rights reserved.
Source Title: Games and Economic Behavior
URI: http://scholarbank.nus.edu.sg/handle/10635/103627
ISSN: 08998256
DOI: 10.1016/S0899-8256(02)00561-4
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