Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/29564
Authors: 
Gu, Yiquan
Wenzel, Tobias
Year of Publication: 
2009
Series/Report no.: 
IWQW discussion paper series 03/2009
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
Document Type: 
Working Paper

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