A Location Model With Preference for Variety

27 Pages Posted: 15 Dec 2006

See all articles by Hyunho Kim

Hyunho Kim

Science and Technology Policy Institute (STEPI) - Speciality Construction Center

Konstantinos Serfes

Drexel University

Abstract

We propose a new location model where consumers are allowed to make multiple purchases (i.e., one unit from each firm). This model may fit many markets (e.g. newspapers, credit cards) better than existing models. A common feature of these markets is that some consumers are loyal to one brand, while others consume more than one product. Our model yields predictions consistent with this observation. If firms are allowed to choose their locations on the interval, then spatial differentiation may not be maximal and in some cases it may even be minimal. Thus, under certain conditions, we restore Hotelling's Principle of Minimum Differentiation.

Suggested Citation

Kim, Hyunho and Serfes, Konstantinos, A Location Model With Preference for Variety. Journal of Industrial Economics, Vol. 54, No. 4, pp. 569-595, December 2006. Available at SSRN: https://ssrn.com/abstract=951837 or http://dx.doi.org/10.1111/j.1467-6451.2006.00300.x

Hyunho Kim (Contact Author)

Science and Technology Policy Institute (STEPI) - Speciality Construction Center ( email )

26F Shindaebang-dong
Dongjak-gu, Seoul 156-714
Korea

Konstantinos Serfes

Drexel University ( email )

3220 Market Street
Philadelphia, PA 19104
United States
215-895-6816 (Phone)
215-571-4670 (Fax)

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