Hotelling's (1929) model of duopolistic competition is re-examined. A family of utility functions is used which has as a special case Hotelling's original utility function. In a two-stage location- price game it is shown that an equilibrium exists when the curvature of the utility functions in the space of characteristics is sufficiently high. The (subgame-perfect) equilibrium never exhibits minimum product differentiation. On the other hand, not all equilibria are at maximal product differentiation.

Published in Economics Letters, no. 21, pp. 67-71, (1986)

Stern School of Business, New York, NY 10012, tel. (212) 998-0864, fax (212) 995-4218, e-mail: neconomi@stern.nyu.edu, www: http://raven.stern.nyu.edu/networks/ .

in Acrobat format. If you do not have an Acrobat reader, you can download it free from Adobe.