We analyze two- and three-dimensional variants of Hotelling's model of differentiated products. In our setup, consumers can place different importance on each product attribute; this is measured by a weight in the disutility of distance in each dimension. Two firms play a two-stage game; they...

Theoretical models of multidimensional product differentiation predict that in duopoly firms differentiate maximally along one dimension and minimally along the other dimensions. We experimentally reproduce a market in which firms can differentiate their products along two horizontal dimensions....

The literature on product differentiation predicts that firms are likely to differentiate their products in order to relax price competition. We tested this theoretical result in a laboratory setting, by organizing twenty-four markets where products were offered with different quality levels. We...