Analytical solution of a multi-dimensional Hotelling model with quadratic transportation costs
AbstractWe present an analytical solution to the two-dimensional two-stage Hotelling model with quadratic transportation costs. We assume that consumers' choice is tempered by a logit function, which characterizes consumers' heterogeneity. As in the one-dimensional case, stores aggregate spatially when consumers' heterogeneity is strong enough. When it decreases, we show that stores differentiate in only one dimension. The analytical solution allows us to give a precise interpretation of this effect through the comparison of consumers' elasticity under differentiation along one or two characteristics. Finally, we extend our results to a hypercube of any dimension.
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Bibliographic InfoArticle provided by Elsevier in its journal Regional Science and Urban Economics.
Volume (Year): 39 (2009)
Issue (Month): 3 (May)
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Spatial competition Minimum differentiation Consumer heterogeneity Analytical solution;
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- Tabuchi, Takatoshi, 1994. "Two-stage two-dimensional spatial competition between two firms," Regional Science and Urban Economics, Elsevier, vol. 24(2), pages 207-227, April.
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- repec:ner:louvai:info:hdl:2078.1/45653 is not listed on IDEAS
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