Heterogeneous preferences and location choice with multi-product firms

We investigate whether the principle of minimum differentiation extends to location choices by multi-product firms of different sizes supplying differentiated goods to consumers with heterogeneous tastes. Our analysis allows for location equilibria to be asymmetric and compares multi-product equilibria with location configurations that would arise if each outlet were operated by a single-product firm. Multi-product firms disperse their products if consumer heterogeneity is low or distance between markets is high. They adopt more dispersed locations than single-product firms to limit business stealing from their own outlets. Asymmetry is shown to characterize location configurations of both multi- and single-product firms. (C) 2003 Elsevier B.V. All rights reserved.