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Price-sensitive demand and market entry

Author

Listed:
  • Gu, Yiquan
  • Rasch, Alexander
  • Wenzel, Tobias
Abstract
This paper revisits the optimal entry decision in a differentiated product market where customer demand is price-sensitive and depends on a per-unit transport cost. We show that too few firms may enter for high entry cost and high transport cost compared to the socially optimal outcome.

Suggested Citation

  • Gu, Yiquan & Rasch, Alexander & Wenzel, Tobias, 2014. "Price-sensitive demand and market entry," DICE Discussion Papers 165, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:165
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    References listed on IDEAS

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    3. Stefano Colombo, 2011. "Spatial price discrimination in the unidirectional Hotelling model with elastic demand," Journal of Economics, Springer, vol. 102(2), pages 157-169, March.
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    Cited by:

    1. Gu, Yiquan & Rasch, Alexander & Wenzel, Tobias, 2022. "Consumer salience and quality provision in (un)regulated public service markets," Regional Science and Urban Economics, Elsevier, vol. 93(C).

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    More about this item

    Keywords

    Circular city; Horizontal product differentiation; Market entry; Price-sensitive demand;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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