The Max-min-min Principle of Product Differentiation

  title={The Max-min-min Principle of Product Differentiation},
  author={Asim Ansari and Nicholas Economides},
We analyze two and three-dimensional variants of Hotelling’s model of differentiated products. In our setup, consumers can place different importance on each product attribute; this is measured by a weight in the disutility of distance in each dimension. Two firms play a two-stage game; they choose locations in stage 1 and prices in stage 2. We seek subgame-perfect equilibria. We find that all such equilibria have maximal differentiation in one dimension only; in all other dimensions, they have… CONTINUE READING