Hotelling's competition with demand location uncertainty

Author ORCID Identifier

John HarterORCID iD iconhttps://orcid.org/0000-0001-7500-6712

Department

Business

Document Type

Article

Publication Date

5-1-1997

Abstract

Firms' product variety choices are examined in a differentiated products model where the range of consumers' preferences is an unknown (strict) subset of the range of potential innovations. It is found that the firms, locating sequentially, will follow the basic pattern of locations found by Neven (International Journal of Industrial Organization, 1987, 5, 419–434). The uncertainty, however, generally causes a greater, more symmetric, amount of differentiation among varieties as firms gamble on finding a market niche with less fierce competition. For a sufficiently large pool of potential entrants, some firms will lose this gamble and will fail.

Journal Title

International Journal of Industrial Organization

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