However, the key perverse comparative static of the symmetric kinked equilibrium, decreasing price as a function of transport cost, survives relaxation of the unit-demand assumption. Introducing elasticity into consumer demands suppresses the kink in the firms' demand functions and ensures the uniqueness (and symmetry) of the price equilibrium. We provide a complete characterization of the asymmetric equilibria, show that they exist for a comparatively 'wide' range of markets, and argue that their existence is robust to various extensions of the prototype model.

Yet the following key aspects of this model are little understood: (i) the existence of asymmetric price equilibria when consumers have unit demands and (ii) for a very broad set of model specifications, the non-monotonicity of price as a function of consumers' transportation cost, i.e., the degree of product differentiation in the market. The Hotelling model with finite consumer reservation price is, in its various forms, perhaps the canonical model of horizontal product differentiation.