Bertrand-Edgeworth competition with substantial horizontal product differentiation (Q2021334): Difference between revisions

The authors complements the Kreps and Scheinkman's approach on the capacity constraints' potential to relax price competition. Instead of assuming that products are either perfect or very close substitutes, he is looking at the interaction between capacity constraints and local monopoly power, by using a standard Hotelling setup. The high level of product differentiation results in a variety of equilibrium firm behavior and it generates at least one pure-strategy equilibrium for any capacity level.