Multiproduct firm behavior in a differentiated market.

Summary The authors propose a generalization of the circular model of product differentiation by considering a multi-product firm competing with a large number of single-product firms. They show the existence of a price equilibrium in the market, which they characterize in the case of quadratic transport costs for consumers. They show the properties of this equilibrium in terms of market shares and profits obtained by the firms. The multi-product firm uses its market niches to implement asymmetric pricing that allows part of its line to be protected from competition and to extract the maximum surplus from consumers.