Hotelling's competition with demand location uncertainty
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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.
Harter, John R.F., "Hotelling's competition with demand location uncertainty" (1997). EKU Faculty and Staff Scholarship. 596.
International Journal of Industrial Organization