Competitive outcomes in product-differentiated oligopoly

Michael J. Mazzeo*

*Corresponding author for this work

Research output: Contribution to journalReview articlepeer-review

54 Scopus citations

Abstract

This paper analyzes the effect of market concentration and product differentiation on the observed outcomes of competition among oligopolists. The empirical framework is designed to examine whether competition is less intense in markets with equal levels of concentration but more differentiation among the products offered. A two-stage estimation procedure is proposed to address the endogeneity problem inherent in comparing outcomes across different market structures. I estimate the competitive effects using data from a cross section of oligopoly motel markets located along U.S. interstate highways. The results indicate that firms benefit substantially by offering differentiated products. The presence of any market competitor drives down prices, but the effect is much smaller when the competitor is a different product type. Differentiation is optimal product choice behavior because the resulting competition among firms is less tough when their products are differentiated.

Original languageEnglish (US)
Pages (from-to)716-728
Number of pages13
JournalReview of Economics and Statistics
Volume84
Issue number4
DOIs
StatePublished - Nov 2002

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Competitive outcomes in product-differentiated oligopoly'. Together they form a unique fingerprint.

Cite this