Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7348706 | Economics Letters | 2018 | 4 Pages |
Abstract
This paper extends the classical model of sales (Varian, 1980; Rosenthal, 1980) by adding product differentiation. Instead of uninformed (i.e. loyal) customers, our setting features “variety seekers”. These consumers regard the products as imperfect substitutes. As in the original model, the firms also serve “bargain seekers” who buy the cheapest product. The discontinuous demand structure precludes any pure-strategy equilibria. We characterize the symmetric mixed-strategy equilibrium of the modified game. In contrast to the original model, the upper bound on prices and the equilibrium expected profits are decreasing in the mass of bargain seekers.
Related Topics
Social Sciences and Humanities
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Economics and Econometrics
Authors
Vladimir Petkov,