Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142549
Authors: 
Zacharias, Eleftherios
Year of Publication: 
2009
Series/Report no.: 
EERI Research Paper Series 17/2009
Abstract: 
We show that the entry of a second firm in a horizontally differentiated market (ala Hotelling) may harm consumers as prices increase and consumer's surplus possibly decrease. We first derive the price and the consumer's surplus of a monopoly which is located at the center of the market. When a second firm enters the market the first firm repositions and the two firms locate at their equilibrium points. Although competition adds to variety and increases consumer's surplus, the post entry increase in price may outweight the gains from extra variety and make consumers worse off.
Subjects: 
Horizontal di¤erentiation
welfare analysis
product repositioning
JEL: 
L13
D43
D60
Document Type: 
Working Paper

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