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Demand Functions (demand + function)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	78%
Engineering	9%
Humanities and Social Sciences	6%
2 Other Domains	7%

Distribution within Business, Economics, Finance and Accounting

General & Introductory Economics	73%
Agricultural Economics & Resource Management	15%
3 Other Subdomains	12%

Selected Abstracts

Profit Maximizing Warranty Period with Sales Expressed by a Demand Function

QUALITY AND RELIABILITY ENGINEERING INTERNATIONAL, Issue 3 2007
Shaul P. Ladany
Abstract The problem of determining the optimal warranty period, assumed to coincide with the manufacturer's lower specification limit for the lifetime of the product, is addressed. It is assumed that the quantity sold depends via a Cobb,Douglas-type demand function on the sale price and on the warranty period, and that both the cost incurred for a non-conforming item and the sale price increase with the warranty period. A general solution is derived using Response Modeling Methodology (RMM) and a new approximation for the standard normal cumulative distribution function. The general solution is compared with the exact optimal solutions derived under various distributional scenarios. Relative to the exact optimal solutions, RMM-based solutions are accurate to at least the first three significant digits. Some exact results are derived for the uniform and the exponential distributions. Copyright © 2006 John Wiley & Sons, Ltd. [source]

The Stability of Emu-wide Money Demand Functions and the Monetary Policy Strategy of the European Central Bank

THE MANCHESTER SCHOOL, Issue 2 2000
Annick Bruggeman
In this paper we investigate whether monetary aggregates could play a role as either intermediate targets or indicators of the single monetary policy of the European Central Bank (ECB). To this end we estimate money demand functions for the European Economic and Monetary Union and test for their stability. Our estimations suggest that M3H in particular can play a role in both a monetary and an inflation targeting strategy. If the ECB chooses to opt for an inflation targeting strategy MR and even M1, in addition to M3H, may well serve as important indicators, alongside a number of other financial and real variables. [source]

Modelling inbound international tourism demand to Portugal

INTERNATIONAL JOURNAL OF TOURISM RESEARCH, Issue 3 2002
Ana Cristina M. Daniel
Abstract In this paper the Johansen cointegration analysis of time series is used to model the Portuguese inbound international tourism demand from five countries of origin,France, Germany, The Netherlands, Spain and UK. This approach examines the long-run relationships between the demand for holiday visits and the variables that affect holiday travel such as income, destination prices and travel costs (airfares and road costs). Demand functions, for each country of origin, are estimated using annual data on tourism flows from 1975 to 1997. Copyright © 2002 John Wiley & Sons, Ltd. [source]

The Irish grain trade from the Famine to the First World War

ECONOMIC HISTORY REVIEW, Issue 1 2004
Liam Brunt
This article presents the first consistent and continuous data series for the Irish grain trade, 1840-1914, showing that imports of wheat and maize rose massively. The resulting three-fold increase in Irish per caput wheat consumption occurred mostly before 1875 and brought it close to British levels by 1914. A consumer price index is constructed for the period, and it reveals that prices declined until 1900 and rose thereafter. Using the two new series (per caput wheat consumption and the price index), the authors estimate a demand function for wheat and show that the per caput increase was due to the rise in the real wage. [source]

Quantity versus quality effects of generic advertising: The case of Norwegian salmon

AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 1 2007
Øystein Myrland
In this article, a two-equation sample selection model is used to estimate a household demand function for salmon incorporating domestic generic advertising. The two-equation estimation procedure, based on purchase and unit value equations, allows us to handle heavily censored panel data for salmon purchases by Norwegian households and the quality effects simultaneously. Unit values of the aggregated salmon commodity calculated from the observed expenditures and quantities are hypothesized to represent the average quality of the purchased commodity. Advertising effects on both purchases and unit values are investigated. The model also allows us to separate the effects of conditional purchases and purchase probabilities. Results indicate that most (76%) of the advertising effect is through the change of nonpurchase occasions to purchase occasions, and that generic salmon advertising induces Norwegian households to spend more money on salmon. However, advertising causes households to select more expensive products rather than increasing their purchased quantities. [EconLit citations: D12, C24]. © 2007 Wiley Periodicals, Inc. Agribusiness 23: 85,100, 2007. [source]

Advertising's effect on the market demand elasticity: A note

AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 2 2004
Henry W. Kinnucan
Using a simple market model and Frisch's duality relation, this report develops propositions about the relationship between advertising and the market demand elasticity that may prove useful in empirical research. In particular, we find that a parallel shift in a linear demand function always alters the market demand elasticity unless supply is unitary elastic. However, the elasticity change in most cases will be negligible. We also find that curve rotation does not imply that the demand elasticity has changed, and vice versa. Lastly, if the price level affects advertising's ability to shift the market demand curve, it must also be true that advertising affects the demand elasticity. The converse is also true, i.e., if advertising affects the demand elasticity, the price level must affect advertising's ability to shift the demand curve. [JEL citations: Q130, Q170, Q180.] © 2004 Wiley Periodicals, Inc. Agribusiness 20: 181,188, 2004. [source]

Pricing training and development programs using stochastic CVP analysis

MANAGERIAL AND DECISION ECONOMICS, Issue 3 2005
James A. Yunker
This paper sets forth, analyzes and applies a stochastic cost-volume-profit (CVP) model specifically geared toward the determination of enrollment fees for training and development (T+D) programs. It is a simpler model than many of those developed in the research literature, but it does incorporate one advanced component: an ,economic' demand function relating the expected sales level to price. Price is neither a constant nor a random variable in this model but rather the decision-maker's basic control variable. The simplicity of the model permits analytical solutions for five ,special prices': (1) the highest price which sets breakeven probability equal to a minimum acceptable level; (2) the price which maximizes expected profits; (3) the price which maximizes a Cobb,Douglas utility function based on expected profits and breakeven probability; (4) the price which maximizes breakeven probability; and (5) the lowest price which sets breakeven probability equal to a minimum acceptable level. The model is applied to data provided by the Center for Management and Professional Development at the authors' university. The results suggest that there could be a significant payoff to fine-tuning a T+D provider's pricing strategy using formal analysis. Copyright © 2005 John Wiley & Sons, Ltd. [source]

Gasoline demand, pricing policy and social welfare in the Islamic Republic of Iran

OPEC ENERGY REVIEW, Issue 2 2007
Majid Ahmadian
This study estimates the gasoline demand function for the Islamic Republic of Iran, using the structural time series model over the period 1968-2002, and uses it to estimate the change in social welfare for 2003 and 2004, of a higher gasoline price policy. It is found that short- and long-run demand price elasticities are inelastic, although the response is greater in the long run. Hence, social welfare is estimated to fall because of the higher gasoline price (ceteris paribus). However, allowing all variables in the model to change, social welfare is estimated to increase since the changes in the other variables more than compensate for the negative effects of the policy. [source]

Profit Maximizing Warranty Period with Sales Expressed by a Demand Function

Pareto-Improving Redistribution in a Monopoly

THE JAPANESE ECONOMIC REVIEW, Issue 2 2003
Jacques Thépot
This paper discusses the impact of income transfers between consumers of a monopoly. In this context, redistributing the incomes could induce an increase of the demand elasticity which leads to a lower monopoly price, beneficial to any consumer. Under mild assumptions on the demand function, we prove the existence of a transfer maximizing the market coverage which remains advantageous for any contributing consumer. It is proved that the producer is also better off. Then the transfer is Pareto-improving. In the linear demand case, analytical results are found. Extensions to Cournot oligopoly and natural monopoly pricing are considered. JEL Classification Numbers: D31, D64, H2, L13 [source]

The economic advantage of learners in a spot/futures market

THE JOURNAL OF FUTURES MARKETS, Issue 2 2003
Scott C. Linn
This article examines the economic advantage of learners in a futures market. We develop a dynamic model of learning in which a spot market and futures market both exist for a real good. The economy is composed of producers who can engage in hedging activities, speculators who trade in the futures market, and consumers who are described by an inverse demand function for the underlying commodity. Producers and speculators are heterogeneous and are differentiated based upon the predictive equations they employ when formulating forecasts of next period's spot price. We derive the dynamic rational-expectations equilibrium of the model and show that learners enjoy an economic advantage in the futures market. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:151,167, 2003 [source]

ON LABOUR DEMAND AND EQUILIBRIA OF THE FIRM,

THE MANCHESTER SCHOOL, Issue 5 2005
ROBERT L. VIENNEAU
This note considers a linear programming formulation of the problem of the firm. A neoclassical non-increasing labour demand function is derived from the solution of the linear program. Only a set of measure zero on this function, one or two points in the examples examined, provides equilibria of the representative firm. Equilibria of the representative firm are characterized by decisions of its managers that allow the same decisions to be made in successive periods. Hence, one can explain the quantity of labour that firms desire to hire either by a traditional neoclassical labour demand function or by equilibria of the firm, but generally not both. [source]

The Functional Form Of The Demand For Euro Area M1

THE MANCHESTER SCHOOL, Issue 2 2003
Livio Stracca
A remarkable development seen in recent years is the pronounced decline in euro area M1 velocity vis,à,vis a moderate decline in short,term interest rates, which represent the most natural opportunity cost for M1, suggesting an increase in the interest rate elasticity of M1 demand. In fact, estimating a theoretically plausible and stable demand function for M1 in the euro area is possible if a functional form of money demand allowing for an interest rate elasticity decreasing in size with the level of the interest rate is imposed. This finding would apparently suggest that the decline in inflation and nominal interest rates in Europe experienced in the run,up to the euro should have ,naturally' brought about an increased degree of preference for liquidity without any fundamental change in agents' preferences. To test the validity of this conclusion, a time,varying parameters model is estimated through a Kalman filter on the level of real M1, which is able to test simultaneously the stability of the parameters and the functional form of the demand for euro area M1. In this case, results clearly suggest the double,log function to be very close to the true ,deep' functional form of M1 demand in the euro area, consistent with the findings of Chadha, Haldane and Janssen for the UK and of Lucas for the USA. At the same time, there is evidence of an increased interest rate elasticity in M1 demand in the most recent years, presumably associated with the transition to the new environment prevailing from the start of Stage Three of European Monetary Union. [source]

MODELLING DEMAND FOR BROAD MONEY IN AUSTRALIA,

AUSTRALIAN ECONOMIC PAPERS, Issue 1 2005
ABBAS VALADKHANIArticle first published online: 21 FEB 200
The existence of a valid long-run money demand function is still important for the conduct of monetary policy. It is argued that previous work on the demand for money in Australia has not been very satisfactory in a number of ways. This paper examines the long- and short-run determinants of the demand for broad money employing the Johansen cointegration technique. Using quarterly data for the period 1976:3,2002:2, this paper finds, inter alia, that the demand for broad money is cointegrated with real income, the rate of return on 10-year Treasury bonds, the cash rate and inflation. It appears that a disequilibrium in the demand for money can affect the efficacy of interest rate policy in the long run via its impact on future output growth and output gap. [source]

Vertical product differentiation and the import demand function: theory and evidence

CANADIAN JOURNAL OF ECONOMICS, Issue 2 2002
Jim Malley
In this paper we use a model of vertical product differentiation to cast doubt on the general validity of the import demand function as specified in macroeconomic models. The empirical importance of our theoretical concerns is then established. According to our first hypothesis, the share of a good's imports in total imports is non-increasing in domestic wages if the country has comparative advantage in high-quality varieties of this good. The second hypothesis states that the share of a good's imports is increasing in non-wage domestic income if the country has comparative advantage in high-quality varieties of this good. JEL Classification: F4, F41 Différenciation verticale des produits et fonction de demande d'importations : théorie et résultats. Dans ce mémoire, les auteurs utilisent un modèle de différenciation verticale des produits pour jeter certains doutes sur la validité générale de la fonction de demande d'importations telle que spécifiée dans les modèles macroéconomiques. L'importance empirique de ces malaises théoriques est étudiée à l'aide de deux hypothèses. La première hypothèse suggère que la part d'un bien dans les importations totales d'un pays ne va pas croître quand les salaires du pays s'accroissent si le pays a un avantage comparatif dans les variétés de haute qualité de ce bien. La seconde hypothèse suggère que la part d'un produit qui provient de l'importation croît quand le revenu intérieur non-salarial s'accroît si le pays a un avantage comparatif dans les variétés de haute qualité de ce bien. On observe des résultats qui donnent un support empirique ferme à ces deux propositions en analysant les données en provenance de l'Allemagne, du Japon et des Etats-Unis. [source]

Trade Policies for Exporting Industries under Free Entry

GERMAN ECONOMIC REVIEW, Issue 4 2001
Roberto A. De Santis
This paper computes optimal export taxes and domestic production subsidies for exporting industries under free entry. We show that domestic welfare is not at maximum, as is typically believed, when the export price is a monopoly price, and the domestic price is a competitive price, because a market structure effect has to be taken into account. Furthermore, we show that the optimal tax/subsidy formulas for an oligopoly coincide with those under perfect competition, if foreign and domestic demand functions are both linear. We also discuss optimal trade policies when only one instrument is available, and we run numerical simulations to determine and compare optimal trade taxes under endogenous and exogenous market structures. [source]

The benefits of switching smoking cessation drugs to over-the-counter status

HEALTH ECONOMICS, Issue 5 2002
Theodore E. Keeler
This paper provides an analysis of the benefits to society from the conversion of nicotine replacement drugs (nicotine patches and gum) in 1996 from sale by prescription only in the United States to over-the-counter (OTC) sales. To estimate these benefits, we first estimate statistical demand functions for nicotine patches and gum. Second, we calculate the effects of OTC conversion on sales of each type of nicotine replacement drug. Third, we survey the literature on the effects of nicotine replacement drugs on total quits of cigarette smoking. Fourth, we survey the literature on the effects of quits achieved on expected lifespan, and on the estimated monetary value of longer lives from smoking cessation. Finally, we use all this evidence to calculate the value of the social benefits of the OTC conversion to the US. As a result of the OTC conversion, consumption of nicotine replacement drugs has increased substantially, by 78,92% for nicotine patches and 180% for nicotine gum. We estimate that the resulting increase in smoking cessation generated annual net social benefits of the order of magnitude of $1.8,2 billion, based on conservative estimates both of the number of quits achieved and the value of added quality-adjusted life years from the reduced smoking. Copyright © 2002 John Wiley & Sons, Ltd. [source]

Multiunit Pay-Your-Bid Auction with One-Dimensional Multiunit Demands*

INTERNATIONAL ECONOMIC REVIEW, Issue 3 2003
Bernard Lebrun
An arbitrary number of units of a good is sold to two bidders through a discriminatory auction. The bidders are homogeneous ex ante and their demand functions are two-step functions that depend on a single parameter. We characterize the symmetric Bayesian equilibrium and prove its existence and uniqueness. We compare this equilibrium with the equilibrium of the multiunit Vickrey auction and with the equilibria of the single-unit first price and second price auctions. We examine the consequences of bundling all units into one package. We study the impacts that variations of the "relative" supply have on the equilibrium, on the bidders' average payoffs per unit, and on the efficiency of the equilibrium allocation. [source]

Spot water markets and risk in water supply

AGRICULTURAL ECONOMICS, Issue 2 2005
Javier Calatrava
Water markets; Economic risk; Water availability; Irrigated agriculture Abstract Water availability patterns in semiarid regions are typically extremely variable. Even in basins with a highly developed infrastructure, users are subject to unreliable water supplies, incurring substantial economic losses during periods of scarcity. More flexible instruments, such as voluntary exchanges of water among users, can help users to reduce risk exposure. This article looks at the effects of spot water markets on the economic risk caused by water availability variations. Our theoretical and empirical risk analyses are based on the random profits of water users. Profit probability density functions are formally and graphically characterized for both water sellers and buyers under several possible market outcomes. We conclude from this analysis that, where water supply is stochastic, water markets unambiguously reduce both parties' risk exposure. The empirical study is conducted on an irrigation district in the Guadalquivir Valley (Southern Spain), where there is a high probability of periods of extreme water scarcity. Water demand functions for the district representative irrigators and a spatial equilibrium model are used to simulate market exchanges and equilibrium. This programming model is combined with statistical simulation techniques. We show that the profit probability distribution of a representative irrigator is modified if water exchanges are authorized, leading to risk reductions. Results also indicate that if the market were extended to several districts and users that are subject to varying hydrological risk exposure, extremely low-profit events would be less likely to occur. In sum, we show that exchanging water in annual spot markets can reduce farmers' economic vulnerability caused by water supply variability across irrigation seasons. These results support the water policy reform carried out in Spain in 1999 to allow for voluntary water exchanges among right holders. [source]

A firm level analysis of trade, technology and employment in South Africa

JOURNAL OF INTERNATIONAL DEVELOPMENT, Issue 1 2004
Lawrence Edwards
This paper uses two firm level surveys, the National Enterprise (NE) survey and the Greater Johannesburg Metropolitan Area (GJMA) survey, to explore the implications of globalization for employment in South Africa. These relationships are explored using cross-tabulations and estimated labour demand functions. The paper finds that rising import penetration negatively affected employment in large firms, but not small firms. Relatively large declines in employment also occurred within export firms, despite improvements in export competitiveness and export growth through trade liberalization. Finally, the study finds that skill-biased and trade-induced technological change, as reflected in increased use of computers, foreign investment and the importation of raw material inputs, have raised the skill intensity of production. Copyright © 2004 John Wiley & Sons, Ltd. [source]

Cartelizing effects of horizontal shareholding interlocks

MANAGERIAL AND DECISION ECONOMICS, Issue 6 2001
Ugo Merlone
Abstract Some models of industries with horizontal shareholding interlocks are generalized. First, we consider industries where firms exhibit different technologies and more general market demand functions. The cartelizing effects of financial interlocks are examined using both the Lerner index and the Herfindahl,Hirshman index. Furthermore, the model is extended to consider multiproduct oligopolies. We find a compact expression for the Lerner index and study the cartelizing effects of such an industry. Copyright © 2001 John Wiley & Sons, Ltd. [source]

Markets for surplus components with a strategic supplier,

NAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 8 2005
Lingxiu Dong
Abstract We study markets for surplus components, which allow manufacturers with excess component inventory to sell to firms with a shortage. Recent developments in internet commerce have the potential to greatly increase the efficiency of such markets. We develop a one-period model in which a monopolist supplier sells to a number of independent manufacturers who are uncertain about demand for final goods. After uncertainty is resolved, the manufacturers have the opportunity to trade. Because uncertainty is over demand functions, the model allows us to endogenize both the price of final goods and the price of components in wholesale and surplus markets. We derive conditions on demand uncertainty that determine whether a surplus market will increase or decrease supplier profits. Increased costs of transacting on the surplus market may benefit manufacturers, because of the impact of these costs on the supplier's pricing power. The surplus market can decrease overall efficiency of the supply chain, since the benefit of better allocation of components may be outweighed by an increased double-marginalization effect. © 2005 Wiley Periodicals, Inc. Naval Research Logistics, 2005. [source]

Underlying consumer preferences and their contribution to energy demand

OPEC ENERGY REVIEW, Issue 3-4 2009
Olutomi I. Adeyemi
The demand for energy is not simply a function of price and income, but can be shown to also be a function of the underlying energy demand trend (UEDT). The UEDT not only captures behavioural responses to non-fiscal instruments, including technological change, but also encapsulates attitudinal responses/changes in demand that might result, for instance, from increased public awareness of how environmentally damaging energy use can be; hence, reflecting underlying consumer preferences. This study estimates a longitudinal econometric model for the aggregate demand functions of a sample of 17 Organisation for Economic Co-operation and Development countries for the period 1960,2005. This approach to modelling will enable UEDTs to be observed for each of the countries, as well as normal price and income elasticities. The model results will provide an indication of the extent to which price/income-based instruments can be used to reduce the demand for energy, as well as indicating the extent to which consumers have responded to non-price/income instruments. [source]

Transportation demand for petroleum products in Indonesia: a time series analysis

OPEC ENERGY REVIEW, Issue 2 2009
Suleiman Sa'ad
This paper used annual time series data for the period 1973 to 2007 in two econometric techniques [the structural time series model (STSM) and unrestricted error correction model (UECM)] developed to estimate petroleum products (gasoline and diesel) and demand functions for the transportation sector of Indonesia and make a forecast of per capita consumption of the total products until the year 2030 under three scenarios. The results from both models revealed that the demand for petroleum products are price inelastic, with an estimated long-run price elasticity of ,0.19 in the STSM and ,0.16 in the UECM. However, total petroleum is income elastic in the long run with a long-run income elasticity of 0.97 under the STSM and 0.88 in the UECM. The estimated demand functions are used to construct a projection of future transportation demand for petroleum products until 2030 under three alternative scenarios: business as usual, low case scenario and high case scenario. The results of this exercise suggests that by 2030, the demand for total petroleum products per capita for Indonesia will increase to about 0.498 toe in the STSM and 0.476 toe in the UECM under the baseline scenario, 0.197 toe in the STSM and 0.186 toe in the UECM under low case scenario and finally, 0.976 toe in the STSM and 0.886 toe under high case scenario. [source]

The demand for electricity in Pakistan

OPEC ENERGY REVIEW, Issue 1 2009
Muhammad Arshad Khan
This paper examines the patterns of electricity demand in Pakistan over the period 1970,2006 using autoregressive distributed lag technique to cointegration. Long run and short-run price and income elasticities are examined for the national level and for the three major consumer's categories,households, industry and agriculture. The overall results suggest that income and price elasticities possess expected signs at aggregate and disaggregate levels in the long run as well as in the short run. The error correction terms possess expected negative signs and are highly significant with reasonable magnitudes. Furthermore, the estimated long run and short-run electricity demand functions remains stable over the sample period. The results thus convey important information to the agents operating in the electricity market regarding the pricing policies and helps in planning the future strategy of electricity demand management. [source]

Optimal control of a revenue management system with dynamic pricing facing linear demand

OPTIMAL CONTROL APPLICATIONS AND METHODS, Issue 6 2006
Fee-Seng Chou
Abstract This paper considers a dynamic pricing problem over a finite horizon where demand for a product is a time-varying linear function of price. It is assumed that at the start of the horizon there is a fixed amount of the product available. The decision problem is to determine the optimal price at each time period in order to maximize the total revenue generated from the sale of the product. In order to obtain structural results we formulate the decision problem as an optimal control problem and solve it using Pontryagin's principle. For those problems which are not easily solvable when formulated as an optimal control problem, we present a simple convergent algorithm based on Pontryagin's principle that involves solving a sequence of very small quadratic programming (QP) problems. We also consider the case where the initial inventory of the product is a decision variable. We then analyse the two-product version of the problem where the linear demand functions are defined in the sense of Bertrand and we again solve the problem using Pontryagin's principle. A special case of the optimal control problem is solved by transforming it into a linear complementarity problem. For the two-product problem we again present a simple algorithm that involves solving a sequence of small QP problems and also consider the case where the initial inventory levels are decision variables. Copyright © 2006 John Wiley & Sons, Ltd. [source]

Effects of the Reform of the Social Medical Insurance System in Japan

THE JAPANESE ECONOMIC REVIEW, Issue 4 2002
Atsushi Yoshida
We estimate outpatient medical care demand functions and examine the effects of the 1997 reform of the medical insurance system. We focus on the issue of which persons have been most affected by the reform and on the extent to which price elasticities have changed since the reform. The estimation results show that the reform affected mainly dependants' demand for medical care, which implies that all members of the household shared the increase in the medical costs of the head of the household. Price elasticities ranged from ,0.18 to ,0.26 before the reform, and from ,0.08 to ,0.11 after the reform. JEL Classification Numbers: C35, I10, I18. [source]

The Stability of Emu-wide Money Demand Functions and the Monetary Policy Strategy of the European Central Bank

ESTIMATING IMPORT AND EXPORT DEMAND ELASTICITIES FOR MAURITIUS AND SOUTH AFRICA

AUSTRALIAN ECONOMIC PAPERS, Issue 3 2010
SEEMA NARAYAN
In this paper, we re-estimate the import and the export demand functions for Mauritius and South Africa using time series data. We use the bounds tests for cointegration and find evidence of a long-run relationship between import demand, income and prices for both countries. Our long run elasticities reveal that domestic income and relative prices have significant effects on the import demand for both countries, with income being the most important determinant. Furthermore, we find that while South Africa's export demand is not responsive to relative prices or income; for Mauritius income is statistically significant. [source]

COMPETITION CAN HARM CONSUMERS,

AUSTRALIAN ECONOMIC PAPERS, Issue 3 2008
SIMON COWAN
Duopolists selling differentiated products can generate less consumer surplus than a monopoly selling one of the products. In a Hotelling-type model where a monopoly supplies more than half of potential consumers, but not all, entry by a rival leads to a duopoly price that is higher than the monopoly price. Consumers in aggregate will be made worse off by such entry when the effect of the price increase outweighs the benefit of extra variety. When consumers have continuous demand functions and firms use two-part tariffs, duopoly can also result in lower aggregate consumer surplus than monopoly. [source]