The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition

Eaton, B. Curtis; Lipsey, Richard G.

doi:10.2307/2296817

Cited by 522 publications

(301 citation statements)

References 18 publications

Supporting

Mentioning

277

Contrasting

Unclassified

Order By: Relevance

“…This is very like the equilibrium identified by Eaton and Lipsey (1975) for single-product firms, suggesting that competing firms with different ownership structures might make similar location choices. However, the relationship between ownership and location choice has not been explicitly investigated.…”

Section: Introductionsupporting

confidence: 63%

Heterogeneous preferences and location choice with multi-product firms

Chisholm

Norman

2004

Regional Science and Urban Economics

View full text Add to dashboard Cite

Section: Introductionsupporting

confidence: 63%

Heterogeneous preferences and location choice with multi-product firms

Chisholm

Norman

2004

Regional Science and Urban Economics

View full text Add to dashboard Cite

“…This permits continued application of the Principle of Minimum Differentiation to politics and advertising. However, as Eaton and Lipsey (1975) have noted there is no such equilibrium with three firms. Also, a mixed equilibrium in products and prices exists in the Hotelling model; see Dugupta and Maskin (19S2b). tively "painless" undercutting-and nonexistence of a pure price equilibrium.…”

Section: Review Of the Literaturementioning

confidence: 96%

Product and Price Competition in a Duopoly

1988

View full text Add to dashboard Cite

This paper examines the role of consumer preferences, costs, and price competition in determining the competitive product strategy of a firm. In the model studied here, there are two identical firms competing on product quality and price. They face consumers who prefer a higher quality product to a lower quality product, but differ in how much they are willing to pay for quality. The consumers can also choose a substitute if they don't like the product-price offerings of the two firms. For the firms, a higher quality product costs more to produce than a lower quality product. The paper shows that the equilibrium strategy for each firm should be to differentiate its product from its competitor, with the firm choosing the higher quality choosing the higher margin as well. This differentiation, however, is not efficient—that is, it is possible to choose two other products and offer them at prices that cover their marginal cost, and still satisfy consumers' “needs” better in the aggregate. A monopolist, by contrast, would differentiate his product line efficiently. This suggests that cannibalization has different effects on product strategy than competition. The paper also shows that if one firm enters the market first, then it can defend itself from later entrants, and gain a first-mover advantage, by preempting the most desirable product position.product strategy, pricing strategy, game theory

show abstract

“…While d'Aspremont et al [16] have shown that this observation does not hold in the case of variable prices, it does hold in case of fixed and equal prices. Moreover, the -pairing‖ of multiple facilities was confirmed by Eaton and Lipsey [17]. Observations in practice reveal that some classes of facilities, e.g., fast food chains, exhibit a strong tendency to cluster.…”

Section: Minimum Differentiation Heuristicmentioning

confidence: 78%

An alternating heuristic for medianoid and centroid problems in the plane

Bhadury

Eiselt

Jaramillo³

2003

Computers & Operations Research

View full text Add to dashboard Cite

Abstract:This paper develops two heuristics for solving the centroid problem on a plane with discrete demand points. The methods are based on the alternating step well known in location methods. Extensive computational testing with the heuristics reveals that they converge rapidly, giving good solutions to problems that are up to twice as large as those reported in the literature. The testing also provides some managerial insight into the problem and its solution.Keywords: Competitive location model; Medianoid; Centroid; Stackelberg solution; Heuristic methods Article: Scope and purposeWhen dealing with competitive location models, one popular solution concept is the Stackelberg solution. It assumes that one (group of) firm(s) acts as leader, while the other(s) act(s) as follower. In the locational context, the follower takes the locations of the leader as given and optimizes on that basis, whereas the leader will exercise foresight and take into account that a follower will subsequently locate additional facilities. It is commonly assumed that the leader knows how many facilities the follower will locate. In this bilevel programming problem, the leader's problem is called a centroid problem, whereas the follower faces a so-called medianoid problem. In both cases, the objective of the facility planner is to capture as much of the market as possible. Since centroid problems are inherently difficult, it is necessary to devise heuristic methods for all but the smallest models. This paper presents two such heuristics for the planar version of the centroid problem that are based on the repeated application of a medianoid solution, a much simpler problem. Computational results attesting to their performance are also included.

show abstract

The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition

Cited by 522 publications

References 18 publications

Heterogeneous preferences and location choice with multi-product firms

Heterogeneous preferences and location choice with multi-product firms

Product and Price Competition in a Duopoly

An alternating heuristic for medianoid and centroid problems in the plane

Contact Info

Product

Resources

About