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Journal of Evolutionary Economics

, Volume 29, Issue 2, pp 741–762 | Cite as

On price stability and the nature of product differentiation

  • Joaquín AndaluzEmail author
  • Gloria Jarne
Regular Article
  • 188 Downloads

Abstract

In a spatial competition model, we analyze the stability of the Nash-price equilibrium under horizontal and vertical product differentiation, considering both homogenous and heterogeneous expectations. Regardless of the nature of product differentiation, assuming that firms behave according to an adaptive expectations rule, it is found that the Nash-price equilibrium is asymptotically stable. If at least one firm follows the gradient rule based on marginal profit, an increase in the adjustment speed turns out to be a source of complexity. Moreover, the influence of the locations on price stability depends on the nature of product differentiation and on the expectations scheme.

Keywords

Horizontal product differentiation Vertical product differentiation Bounded rationality Dynamic stability 

JEL classification

C62 D43 L13 

Notes

Funding

This study was funded by the Spanish Ministry of Economics and Competitiveness (ECO2016–74940-P) and the Government of Aragon and FEDER (S10/2016 and S13/2016 Consolidated Groups) and S40-17R Reference Group.

Compliance with ethical standards

This paper benefited from comments made by two anonymous referees of this journal.

Conflict of interest

The authors declare that they have no conflict of interest.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of Economic AnalysisUniversity of ZaragozaZaragozaSpain

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