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The unidirectional Hotelling model with spatial price discrimination

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  • Stefano Colombo

    (Catholic University of Milan)

Abstract

The unidirectional Hotelling model where consumers can buy only from firms located on their right (left) is extended to allow for price discriminating firms and a general class of transportation costs. In a two-stage location-price game one firm locates at 1/2 and the other locates at 1 (0). We also study collusion in an infinitely repeated game. The maximum collusive profits sustainable in equilibrium monotonically increase (decrease) with the location of the firm located at the right (left), while initially increase and then decrease with the location of the firm located at the left (right). A higher reservation price of consumers makes perfect collusion less sustainable in equilibrium, but allows firms to agree on higher (albeit imperfect) collusive profits.

Suggested Citation

  • Stefano Colombo, 2009. "The unidirectional Hotelling model with spatial price discrimination," Economics Bulletin, AccessEcon, vol. 29(4), pages 3031-3040.
    • Handle: RePEc:ebl:ecbull:eb-09-00522
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    References listed on IDEAS

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    Cited by:

    1. Torbenko, A., 2015. "Linear City Models: Overview and Typology," Journal of the New Economic Association, New Economic Association, vol. 25(1), pages 12-38.
    2. Kai Andree, 2011. "Product differentiation and spatial agglomeration in a unidirectional Cournot model," Letters in Spatial and Resource Sciences, Springer, vol. 4(3), pages 167-172, October.
    3. Stefano Colombo, 2013. "Spatial Cournot competition with non-extreme directional constraints," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(3), pages 761-774, December.
    4. Takeshi Ebina & Daisuke Shimizu, 2012. "A unidirectional Hotelling model revisited," Economics Bulletin, AccessEcon, vol. 32(4), pages 2870-2875.
    5. Chia-Hung Sun, 2014. "Spatial Cournot Competition in a Linear City with Directional Delivery Constraints," The Japanese Economic Review, Japanese Economic Association, vol. 65(3), pages 344-374, September.

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    More about this item

    Keywords

    Unidirectional Hotelling model; Price discrimination; Location-price game; Tacit collusion;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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