PRICE STRATEGY OLIGOPOLY WITH PRODUCT VARIATION

Lloyd S. Shapley · Martín Shubik

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Merger and Competition Analysis Consumer Market Behavior and Pricing Economic theories and models

Abstract

This article presents a mathematical model for monopolistic price competition among firms with differentiated products. The conditions which distinguish the Chamberlinian analysis from that of Edgeworth are examined. Product differentiation is not sufficient to guarantee the existence of a stable non-cooperative equilibrium point in terms of price. The relationship among the degree of product variation, amount of capacity, and stability are examined. Explicit formulas are obtained for the non-cooperative equilibrium and the capacity conditions for its existence. The behavior of the model as the degree of differentiation approaches zero and as competition becomes large is examined. This connects the analysis of oligopoly with the analysis of pure competition.

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2015Competitive Pressure and Innovation at the Firm Level 1978The Equilibrium of Duopoly in a Market of Homogeneous Goods 1989Market Size and Substitutability in Imperfect Competition: A Bertrand-Edgeworth-Chamberlin Model 1989Static game theory models and their applications in management science

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