A unified model of horizontal differentiation with general spaces and irrational consumers

Abstract

We introduce a new microeconomic model of horizontal differentiation that unifies and extends previous developments inspired by the seminal work of Hotelling (1929). Our framework incorporates boundedly rational consumers, an unlimited number of firms, and arbitrary differentiation spaces with Riemannian manifolds. We argue that Riemannian geometry provides a natural and powerful tool for analyzing such models, offering fresh insights into firm behavior and market structure with complex products.

Categories