Answers are grounded in this paper and cite their sources.
A famous result in the literature on horizontal product differentiation is due to C. d'Aspremont, J. J. Gabszewicz, and J. F. Thisse (1979). They show that, in a slightly modified Hotelling model, profit-maximizing firms choose maximum instead of minimum differentiation. The aim of this paper is to show that the result of maximum differentiation is not robust. The author provides provide an example for a wide class of markets where firms will choose interior solutions if consumers have an outside option for their use of money.
No takes yet. Share an insight, caveat, or question.
Sabine Böckem (1994) studied this question.
Synapse has enriched 10 related papers. Consider them for comparative context: