Using two standard location models, we investigate price competition and divergence from optimal product differentiation when consumer preferences are influenced by the number of consumers purchasing the same brand or shopping at the same store. Negative network effects tend to lessen...

Lancasterian models of product differentiation typically assume a one-dimensional characteristics space. We show that standard results on prices and locations no longer hold when firms compete in a multi-characteristics space. In the location game with n characteristics, firms choose to maximize...