Abstract
A monopolist offerings variants on a Salop circle is analyzed with respect to his choice of product variants and prices. Although we assume a uniform distribution of tastes, the profit-maximizing pattern is not equidistant in variants and prices are not the same for all variants.
Instead, under fairly general circumstances, there exists at least one cheap variant (special offer) around which the more expensive ones are clustered. This result depends on the assumption that the market size is not fixed as in most other models of this sort, but depends on prices in a straightforward manner.
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Schulz, N. Special offers and clustering under symmetric monopoly. Zeitschrift für Nationalökonomie 56, 311–334 (1992). https://doi.org/10.1007/BF01237185
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DOI: https://doi.org/10.1007/BF01237185