How the Nature of Product Differentiation Affects Procurement Competition∗

This paper compares the equilibrium outcomes from a recently developed model of procurement competition with differentiated products to those from two analytically tractable models that might naturally be considered suitable proxies. The models differ in what sellers know about the buyer’s preferences for their products, and the newer model must be solved numerically. The three models yield substantially different prices and payoffs, and they exhibit qualitatively different comparative statics. These findings caution against using the analytically convenient models when the newer model is empirically appropriate. Reinterpreting the models and results also provides insights related to earlier analyses of price discrimination in oligopoly.