In this paper we consider a duopoly model of multidimensional vertical product differentiation where product features are discrete and consumers' tastes are described by a joint density function that belongs to the class of Elliptically Contoured Distributions. We prove that in any equilibrium one firm always includes all characteristics in the product. Moreover, when types have perfect positive correlation the unique equilibrium involves maximum differentiation. More importantly, the main result states that the other firm's equilibrium level of differentiation is determined by the correlation among types.

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Multidimensional Product Differentiation with Discrete Characteristics
Mariano G. Runco1
1Auburn University, Montgomery, mrunco@aum.edu
Citation Information: The B.E. Journal of Theoretical Economics. Volume 12, Issue 1, Pages –, ISSN (Online) 1935-1704, DOI: 10.1515/1935-1704.1823, April 2012
Publication History:
- Published Online:
- 2012-04-23
Keywords: product differentiation; oligopolistic competition; product design; price competition; log-concavity; elliptically contoured distributions


















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