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Consider a duopoly where horizontal product differentiation is important. Firms first simultaneously choose their product locations, then simultaneously set prices. Suppose that firms collude in
Consider a duopoly where horizontal product differentiation is important. Firms first simultaneously choose their product locations, then simultaneously set prices. Suppose that firms collude in prices in the second stage (they maxi- mize joint profits instead of each firm maximizing their own profit) and anticipate this at the product-positioning stage. Based on what you have learned so far, what do you expect this implies in terms of the degree of product differentiation? Explain your reasoning.
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