The Competitive Effects of Price Floors
Posted: 27 Nov 1996
There are 2 versions of this paper
Date Written: Undated
Abstract
We analyze the effects of a legally binding price floor using Hotelling's model of locational competition. A moderate price floor destroys the maximal differentiation equilibrium of d'Aspremont, et. al., by allowing firms to compete more aggressively for market share. Minimum differentiation results in lower equilibrium prices. A low price floor results in multiple equilibria--both minimum and maximum differentiation are possible.
JEL Classification: L13, L15, L42
Suggested Citation: Suggested Citation
Bhaskar, V., The Competitive Effects of Price Floors (Undated). Available at SSRN: https://ssrn.com/abstract=4470
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