Location choices under quality uncertainty

Christou, Charalambos; Vettas, Nikolaos

doi:10.1016/j.mathsocsci.2005.05.002

Cited by 10 publications

(7 citation statements)

References 10 publications

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“…Supposing that 𝑐 > 𝜃 and firm 1 chooses to agglomerate at 𝑥 1 = 𝑥 2 = 𝑥 after observing firm 2's decision, then 𝑐 > 𝑐 2 * . In the noncooperative phase (at the threat point), 𝜋 1 𝑁 = 𝑐 − 𝜃 > 0 and 𝜋 2 𝑁 = 0 from ( 6) and (7), implying that firm 1 can obtain all the collusive profit. Thus, 𝜋 1 𝑀 = 𝜋 𝑀 = 𝑠 − 𝑡𝑥 2 according to Lemma 1.…”

Section: Given 𝒄 < 𝜽 Minimal Horizontal Differentiation Does Not Exi...mentioning

confidence: 99%

“…Mai and Peng (1999) showed that subgame perfect equilibrium in a two-stage game can be achieved in a wide range from minimum to maximum differentiation. Christou and Vettas (2005) considered a spatial model in which the degree of firm heterogeneity is stochastically determined after firms choose their locations. They showed that spatial agglomeration (minimum differentiation) can appear in equilibrium.…”

Section: Introductionmentioning

confidence: 99%

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Partial Cooperation, Spatial Agglomeration, and Heterogeneity of Firms in a Horizontal and Vertical Differentiation

Chen,

Huan

2024

Preprint

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This paper constructs a horizontally and vertically differentiated product model in a repeated, collusive pricing game. Based upon different profit-sharing rules, it examines the interacting effects of (vertical) quality distortion and cost difference on (horizontal) market competition. It shows that the asymmetry between marginal cost and perceived quality matters for the emergence of agglomeration. If the magnitude of cost differentials between firms is equal to the magnitude of quality difference, minimal horizontal differentiation emerges in each period regardless of the order of moves and profit-sharing rules. If the magnitudes of cost and quality differences differ, non-minimal horizontal differentiation emerges in each period in a simultaneous-move game. In a sequential-move game, the second-mover advantage exists if the second mover’s strong suit dominates the first mover’s one. Spatial agglomeration/minimal differentiation emerges when the second mover chooses the same location as the first mover under profit maximization. The heterogeneity creates a conflict of interest between firms. Hence, agglomeration appears with the heterogeneity of firms under certain conditions in equilibrium. JEL classification: C70, D43, L11, R12

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Section: Given 𝒄 < 𝜽 Minimal Horizontal Differentiation Does Not Exi...mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Partial Cooperation, Spatial Agglomeration, and Heterogeneity of Firms in a Horizontal and Vertical Differentiation

Chen,

Huan

2024

Preprint

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“…Firms' incentives to differentiate their products, however, may be limited by various factors, like the elasticity of demand and its concentration on particular varieties of products (De Palma et al., ; Economides, ; Neven, ; Böckem, ; Tabuchi and Thisse, ; Rath and Zhao, ), R&D externalities between firms (Mai and Peng, ), uncertainty about consumers' preferences (Rhee et al., ) products' characteristics (Bester, ; Christou and Vettas, ) or costs (Matsushima and Matsumura, ), and collusion (Friedman and Thisse, ; Colombo, )…”

Section: Introductionmentioning

confidence: 99%

Product Differentiation by Competing Vertical Hierarchies

Bassi¹,

Pagnozzi

Piccolo

2015

Economics Manag Strategy

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“…() consider that consumer preferences are heterogeneous, having a component that firms can observe and another that is unobservable. Finally, in the models of Balvers and Szerb () and Christou and Vettas (), firms sell products that are horizontally and vertically differentiated. These authors assume that uncertainty concerns the relative quality of products (i.e., the degree of vertical differentiation).…”

Section: Introductionmentioning

confidence: 99%

Asymmetric Information and Exchange of Information About Product Differentiation

Brandão

Pinho

2012

Bulletin of Econ Res

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We introduce asymmetric information about consumers' transportation costs (i.e., the degree of product differentiation) in the model of Hotelling. When transportation costs are high, both firms have lower profits with asymmetric information than with perfect information. Contrarily, if transportation costs are low, both firms may prefer the asymmetric information scenario (the informed firm always prefers the informational advantage, while the uninformed firm may or may not prefer to remain uninformed). Information exchange is ex-ante advantageous for both firms, but ex-post damaging if transportation costs turn out to be low. If the information is unverifiable, the informed firm does not represent a reliable source of information, since it always prefers to announce that transportation costs are high and there is no contract that induces truthful revelation. 26 As ∂ 2 E 2 ∂ 2 p2 = − (1−θ )t H +θ tL tH tL < 0, the second order condition is always verified.

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Location choices under quality uncertainty

Cited by 10 publications

References 10 publications

Partial Cooperation, Spatial Agglomeration, and Heterogeneity of Firms in a Horizontal and Vertical Differentiation

Partial Cooperation, Spatial Agglomeration, and Heterogeneity of Firms in a Horizontal and Vertical Differentiation

Product Differentiation by Competing Vertical Hierarchies

Asymmetric Information and Exchange of Information About Product Differentiation

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