Eco 561

Big Drive Auto is a multistate dealer of several manufacturers’ cars and trucks. The dealer sells the vehicles, services the vehicles, sells parts for repair, and conducts a significant business in motor oil, coolant, and replacement tires. Management is always scanning the macroeconomic environment for signals that may help Big Drive Auto better plan their business. Big Drive has been keeping data on the volume of sales in its various lines of business over the last 10 years. In some cases, such as auto and truck sales, Big Drive tracks the numbers of units sold. In other cases, Big Drive tracks constant dollar sales. The following tables report Big Drive’s sales in all of its multistate locations since 1998.

The effects of product differentiation may differ when firms compete more directly with some rivals than others. This possibility is imbedded in spatial models of competition, where competition is highly asymmetric or localized to particular firms in the industry. While traditionally defined in terms of geographic location, spatial models of competition also represent those markets where competition depends upon the combination of product characteristics contained in different brands or qualities of the good.(6) In these models, differences among firms' products can be functionally specified by consumers and consumers are diversified in their preferences for specific brands. The emphasis on "niche" and "segmented" markets in the marketing and corporate strategy literature suggests that many markets have these properties.(7) It is also our experience from antitrust investigations that firms often identify specific rivals in their "market" as their closer competitors.

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