Multiproduct Firms in Hotelling’s Spatial Competition

Abstract

Oligopoly models are usually analyzed in the context of two firms, anticipating that market outcomes would be qualitatively similar in the case of three or more firms. The literature on Hotelling's location-then-price competition is not an exception. In this paper, we show that the main finding of brand bunching in Hotelling's duopoly no longer holds once three or more firms are allowed to enter the market.That is, in oligopoly with three or more firms, firms proliferate brands.Keywords: price-then-location competition, multi-outlet oligopoly, brand proliferation, triopoly JEL Classification: L13, R32 * I wish to thank Yi-Ling Cheng, Fu-Chuan Lai, Noriaki Matsushima, Jacques Thisse, and two anonymous referees for useful comments and suggestions.

Quality competition and entry deterrence: When to launch a second brand

“…Therefore, the situation is similar as in the Hotelling linear street model, where the maximum (horizontal) product differentiation result for convex transport costs does also not carry over to the case of three active firms (see, for example, Götz, ). The same holds for brand proliferation under spatial competition, where the duopoly result does also not carry over to competition among more than two firms (see, Tabuchi, ). A similar “accommodate with brand proliferation” result has been derived by Jost ().…”

Locating Outside a Linear City Can Benefit Consumers*

“…Following the models in d’Aspremont et al (1979) and Tabuchi and Thisse (1995), we have considered duopoly models. As discussed in Economides (1993), Brenner (2005), and Tabuchi (forthcoming), we could incorporate more than two players into the basic model discussed here. This extension is a consideration for future research.…”

First mover advantage by product proliferation in multiproduct duopoly

“…Gilbert and Matutes () and Murooka () also show that brand proliferation is not a credible entry‐deterring strategy if the degree of brand‐specific differentiation is large or if price competition is intense. Furthermore, whereas Martinez‐Giralt and Neven () and Ashiya () show that firms do not proliferate brands if price competition is intense, Tabuchi () shows that firms do proliferate brands under intense competition in the case of three firms. Nevertheless, these studies consider rather limited numbers of products.…”