|
The Principle of Minimum Differentiation Holds under Sufficient Heterogeneity
A. de Palma
V. Ginsburgh
Y. Y. Papageorgiou
J.-F. Thisse
Abstract
The so-called Principle of Minimum Differentiation, stated by Hotelling, has been challenged by many authors. This paper restores the Principle by showing that n firms locate at the center of the market and charge prices higher than the marginal cost of production when heterogeneity in consumers' tastes is "large enough."
|
