Validity of the principle of minimum differentiation under vertical subcontracting

Liang, Wen-Jung; Mai, Chao-Cheng

doi:10.1016/j.regsciurbeco.2005.11.004

Cited by 27 publications

(26 citation statements)

References 16 publications

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“…This paper extends Liang and Mai's (2006) research in a spatial competition model under vertical product differentiation. Developing a game in which the firms concerned decide locations in the first stage, set prices in the second, and finally determine the volume of input contracted, it can be shown that the degree of differentiation will be conditioned both by the consignor's bargaining power and the ratio of transport costs.…”

Section: Introductionsupporting

confidence: 59%

“…Recently, Liang and Mai (2006) have developed a variant of Hotelling's (1929) spatial competition model with vertical subcontracting in production, in order to validate the principle of minimum differentiation. These authors show that, if the ratio between the transport cost of a subcontracted input and the transport cost of the finished product is sufficiently large, then the minimum differentiation principle will operate, but if it is low, the maximum differentiation principle will hold.…”

Section: Introductionmentioning

confidence: 99%

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Vertical product differentiation with subcontracting

Andaluz

2009

Papers in Regional Science

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The paper examines the effects of subcontracting on vertical product differentiation in a spatial competition model. It is shown that the level of differentiation is determined by the consignor's bargaining power and the ratio of the transport rates between the final product and the subcontracted input. Furthermore, the paper finds that part of the results obtained under horizontal product differentiation are not reproduced in a vertical product context. Copyright (c) 2009 the author(s). Journal compilation (c) 2009 RSAI.

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Section: Introductionsupporting

confidence: 59%

Section: Introductionmentioning

confidence: 99%

Vertical product differentiation with subcontracting

Andaluz

2009

Papers in Regional Science

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“…In this paper, we restrict our attention to the symmetric case and symmetric equilibrium. In the context of spatial competition, the cost asymmetry often leads to some curious results (Liang and Mai, ; Matsumura and Matsushima, , , ; Meza and Tombak, ). Extending our analysis of FMS to the asymmetric cost structure is a task that remains for future research.…”

Section: Discussionmentioning

confidence: 99%

Endogenous Flexibility in the Flexible Manufacturing System

Matsumura

Shimizu

2012

Bulletin of Econ Res

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“…Many economists have tried to come up with the conditions under which the Principle of Minimum Differentiation is restored. These researchers 3 include: Stahl (1982), De Palma et al (1985, Hurter and Lederer (1985), Lederer and Hurter (1986), Rhee et al (1992), De Fraja and Norman (1993), Neven and Thisse (1990), Anderson and Neven (1991), Jehiel (1992), Friedman and Thisse (1993), Tabuchi (1994), Veendorp and Majeed (1995), Zhang (1995), Irmen and Thisse (1998), Mai and Peng (1999), Liang and Mai (2006), Matsushima and Matsumura (2006), Tseng et al (2010), and Liang et al (2012). Most of the above literature focuses on the use of mill pricing by competing firms, except Hurter and Lederer (1985), Hurter (1986), De Fraja andNorman (1993) and Liang et al (2012), who analyze the optimal location by using spatially discriminatory pricing.…”

Section: Introductionmentioning

confidence: 99%

Spatial competition and flexible manufacturing with spatially discriminatory pricing

2014

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper develops a two-dimensional spatial framework, in which firms have the technique of flexible manufacturing and engage in spatially discriminatory pricing, to explore the firms' optimal locations and optimal attributes of basic products under linear transportation costs. The paper shows that the two firms will agglomerate at the center of the location line and the optimal attributes of the two basic products will be located at the first and third quartiles of the attribute line, respectively, when the ratio of the marginal modification rate to the transport rate is high. It also shows that the two firms will locate separately on the location line and that the optimal attributes of the two basic products will remain at the first and third quartiles, when this ratio is moderate. Moreover, this paper proves that the two firms will locate at the first and third quartiles of the location line, respectively, and that the attribute addresses of the basic products will agglomerate at the center of the attribute line, when this ratio is low.

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Validity of the principle of minimum differentiation under vertical subcontracting

Cited by 27 publications

References 16 publications

Vertical product differentiation with subcontracting

Vertical product differentiation with subcontracting

Endogenous Flexibility in the Flexible Manufacturing System

Spatial competition and flexible manufacturing with spatially discriminatory pricing

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