Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcasts
  • About Us
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Cold Call Podcast
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    • COVID-19 Business Impact Center
      COVID-19 Business Impact Center
      Monopolistic Competition Between Differentiated Products With Demand For More Than One Variety
      28 May 2009Working Paper Summaries

      Monopolistic Competition Between Differentiated Products With Demand For More Than One Variety

      by Andrei Hagiu
      How and when is price competition most significant among firms? This paper develops a theoretical framework for studying price competition between multiple firms. Two examples of markets that fit the description for study are software applications and videogames: There are thousands of software applications as well as games, and different users are interested in different applications and/or games. A given software or game user's tastes may overlap with another's, yet they may have nothing in common with a third's. Thus, although there is a sense in which competition is localized (any given firm competes only with firms whose brands are similar to its own), it is not clear how the fact that consumers are generally interested in purchasing multiple products affects the type of competition waged among firms. Key concepts include:
      • This paper proposes a theoretical framework for studying competition between differentiated products when consumers are interested in purchasing more than one brand.
      LinkedIn
      Email

      Author Abstract

      We analyze the existence of pure strategy symmetric price equilibria in a generalized version of Salop (1979)'s circular model of competition between differentiated products—namely, we allow consumers to purchase more than one brand. When consumers purchase all varieties from which they derive non-negative net utility, there is no competition, so that each firm behaves like an unconstrained monopolist. When each consumer is interested in purchasing an exogenously given number (n) of varieties, we show that there is no pure strategy symmetric price equilibrium in general (for n > 2 with linear transportation costs). In turn, if the limitation on the number of varieties consumers purchase comes from a budget constraint then we obtain a multiplicity of symmetric price equilibria, which can be indexed by the number of varieties consumers purchase in equilibrium. Keywords: Monopolistic competition, Product Variety. 48 pages.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: April 2009
      • HBS Working Paper Number: 09-095
      • Faculty Unit(s): Strategy
        Trending
          • 24 Feb 2021
          • Lessons from the Classroom

          What History's Biggest Wars Teach Us About Leading in Peace

          • 25 Feb 2019
          • Research & Ideas

          How Gender Stereotypes Kill a Woman’s Self-Confidence

          • 17 May 2017
          • Research & Ideas

          Minorities Who 'Whiten' Job Resumes Get More Interviews

          • 13 Jul 2020
          • Research & Ideas

          Merck CEO Ken Frazier Discusses a COVID Cure, Racism, and Why Leaders Need to Walk the Talk

          • 09 Feb 2021
          • Cold Call Podcast

          Developing Resilience on the Path to Becoming a CEO

      Find Related Articles
      • Corporate Strategy
      • Brands and Branding
      • Strategy
      • Price
      • Competition
      • Video Game
      • Web Services

      Sign up for our weekly newsletter

      Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
      ǁ
      Campus Map
      Harvard Business School Working Knowledge
      Baker Library | Bloomberg Center
      Soldiers Field
      Boston, MA 02163
      Email: Editor-in-Chief
      →Map & Directions
      →More Contact Information
      • Make a Gift
      • Site Map
      • Jobs
      • Harvard University
      • Trademarks
      • Policies
      • Digital Accessibility
      Copyright © President & Fellows of Harvard College