Martin Peitz

The Differentiation Triangle

The paper formalizes the observation that submarkets for high-quality and low-quality variants are markedly different from each other. We study a simple model where variants of low quality cannot be horizontally differentiated, whereas customers disagree about the value of variants in the high-quality range. We determine the outcome under price competition in the differentiation triangle with sequential entry when each firm can develop the vertical product line or decide to follow a niche strategy, i.e. to develop only one variant.

Aggregation in a Model of Price Competition

In a model of price competition single-product ¯rms compete for consumers. Consumerspurchase a variable quantity of one of the di®erentiated goods. The paper provides results onequilibrium existence when consumers are heterogeneous in their evaluation of the di®erentiatedgoods among each other, their evaluation of the di®erentiated goods relative to the outside good,and heterogeneous in income. Furthermore, I provide su±cient conditions for dominance solvabilityand monotone comparative statics.

The pro-competitive effect of higher entry costs

Abstract In an oligopolistic market with vertical product differentiation incumbent firms use sophisticated entry deterring and accommodating strategies. When entry costs are low, firms accommodate entry. For higher entry costs incumbent firms deter entry by producing close substitutes. The current paper shows that higher entry costs can lead to more intense competition, meaning lower price–cost margins and lower industry profits. It also shows that total surplus increases and all consumers are strictly better off.

Models a la Lancaster and a la Hotelling: when they are the same

Consumer behavior in differentiated product markets can be specified following the Lancastriancharacteristics approach or following Hotelling´s approach of spatial competition. In the case ofunit demand I present a class of models of (heterogeneous) consumer behavior which can bewritten as models a la Lancaster as well as models a la Hotelling.

On Price Competition with Heterogeneous Consumers

Address models of product differentiation form an important class of models of imperfect competition. Recent work has focused on distributions of consumer characteristics which guarantee the existence of Nash equilibrium where price is a pure strategy. Here, I present results in the case of unit-elastic demand which concentrate on the heterogeneity of budget shares among consumers. Also, I provide existence results on an extended model of discrete choice among goods provided in perfectly and imperfectly competitive markets.

Equilibrium uniqueness in oligopoly games with strategic complements

I show the uniqueness of equilibrium for a class of oligopoly models with strategic complements.Product differentiation models are considered in which the contraction mapping theorem cannotnecessarily be applied.