Monopolistic competition, aggregation of competitive information, and the amount of product differentiation

K. Ravi Kumar*, Mark A. Satterthwaite

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

Consider an industry with a large number of homogeneous firms. Each firm's profits are a function of its own strategy and the strategies the other firms select. Suppose other firms' strategies enter into each firm's profit function only through one or more statistics. For example, average price in the market may parameterize every firm's profit function. We prove that, as a general rule, the industry's firms will in equilibrium follow at most M + 1 distinct strategies, where M is the number of statistics by which competitors' strategies affect each firm's profits.

Original languageEnglish (US)
Pages (from-to)32-54
Number of pages23
JournalJournal of Economic Theory
Volume37
Issue number1
DOIs
StatePublished - Oct 1985

ASJC Scopus subject areas

  • Economics and Econometrics

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