Differentiated Products, Consumer Search, and Locational Oligopoly

Abstract

THE model presented in this paper deals with sellers' reactions, by choice of location, to consumers' search for their preferred product from a variety of imperfect substitutes. It differs in two aspects from models in the Stigler [8] tradition. First, search for optimal product characteristics, rather than mini- mal prices, is emphasized. Second, the consumers' search costs are not exogenous, but sellers influence these costs by their choice of location: they are the lower, the more closely sellers associate spatially. This