SFB 303 Discussion Paper No. A - 479

Author: Peitz, Martin
Title: Models a la Lancaster and a la Hotelling: when they are the same
Abstract: This note relates two different ways of modelling product differentiation to each other. Along the first, consumer behavior is derived within the Lancastrian characteristics approach, along the second, according to a model of spatial competition a la Hotelling. I provide an equivalence result showing that the two approaches are not only linked by analogy. In addition, under assumptions on the heterogeneity of consumers and a restriction of the potential of product differentiation an existence result for these models with price competition is provided.
Keywords: Product Differentiation, Characteristics Approach, Spatial Competition
JEL-Classification-Number: D11, L13
Creation-Date: March 1995
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