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Título: Price competition in mixed strategies in markets with habit formation
Palabras clave: habit-formation
oligopolistic competition
product differentiation
Hotelling's location model
Fecha de publicación: 10-Jul-2012
Editorial: EconoQuantum
Descripción: I analyze competition when individuals' favorite characteristics are the characteristics of the products they have consumed in the past. I model a two-period game in which two firms compete with each other in a market of differentiated products where individuals' favorite characteristics in the second period are the characteristics of the products they consumed in the first period. In this context, firms can manipulate the distribution of preferences. If firms differentiate their products, they will separate preferences, creating the equivalent of a switching cost between products. However, if firms produce similar products, they will reduce the cost of every individual to consume the product of the other firm, increasing competition. I solve for the Subgame Perfect Nash Equilibrium of the model and I find that firms choose to differentiate their products the most possible by placing their products at the extremes of the characteristic space.
Other Identifiers: http://www.scielo.org.mx/scielo.php?script=sci_arttext&pid=S1870-66222010000200003
Aparece en las Colecciones:EconoQuantum

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