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Title:Product variety, price elasticity of demand and fixed cost in spatial models PDF Logo
Authors:Gu, Yiquan
Wenzel, Tobias
Issue Date:2009
Series/Report no.:Ruhr economic papers 92
Abstract:This paper explores the implications of price-dependent demand in spatial models of product differentiation. We introduce consumers with a quasi-linear utility function in the framework of the Salop (1979) model. We show that the so-called excess entry theorem relies critically on the assumption of completely inelastic demand. Our model is able to produce excessive, insufficient, or optimal product variety. A proof for the existence and uniqueness of symmetric equilibrium when price elasticity of demand is increasing in price is also provided.
Subjects:Demand elasticity
spatial models
excess entry theorem
JEL:L11
L13
ISBN:978-3-86788-103-6
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des RWI
Ruhr Economic Papers, RWI

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