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Complete Solution of the Hotelling Problem: Equilibrium in Secure Strategies for the Price Subgame

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  • Iskakov, M.

    (Trapeznikov Institute of Control Sciences RAS, Moscow, Russia)

  • Iskakov, A.

    (Trapeznikov Institute of Control Sciences RAS, Moscow, Russia)

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    Abstract

    We study the classical problem of spatial competition between two players with linear transport costs proposed by (Hotelling, 1929). We employ the concept of the equilibrium in secure strategies (ESS). The reviewed definitions of the ESS and of the best secure response are presented. The set of the secure responses in the Hotelling game is obtained both in the case of elastic and inelastic demand. The complete solution of the two-stage location-price Hotelling game is given for the inelastic demand.

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    File URL: http://www.econorus.org/repec/journl/2012-13-10-33r.pdf
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    Bibliographic Info

    Article provided by New Economic Association in its journal Journal of the New Economic Association.

    Volume (Year): 13 (2012)
    Issue (Month): 1 ()
    Pages: 10-33

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    Handle: RePEc:nea:journl:y:2012:i:13:p:10-33

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    Related research

    Keywords: hotelling; product differentiation; equilibrium in secure strategies;

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    1. Economides, Nicholas, 1986. "Minimal and maximal product differentiation in Hotelling's duopoly," Economics Letters, Elsevier, vol. 21(1), pages 67-71.
    2. Tabuchi, Takatoshi & Thisse, Jacques-Francois, 1995. "Asymmetric equilibria in spatial competition," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 213-227.
    3. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
    4. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 1-26, January.
    5. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 27-41, January.
    6. Lambertini, Luca, 1997. "Unicity of the equilibrium in the unconstrained Hotelling model," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 785-798, November.
    7. Osborne, Martin J & Pitchik, Carolyn, 1987. "Equilibrium in Hotelling's Model of Spatial Competition," Econometrica, Econometric Society, vol. 55(4), pages 911-22, July.
    8. Edward C. Prescott & Michael Visscher, 1977. "Sequential Location among Firms with Foresight," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 378-393, Autumn.
    9. Steffen Brenner, 2005. "Hotelling Games with Three, Four, and More Players," Journal of Regional Science, Wiley Blackwell, vol. 45(4), pages 851-864.
    10. Corrado Benassi & Alessandra Chirco, 2008. "An elasticity approach to equilibrium and preference concentration in the Hotelling game," Journal of Economics, Springer, vol. 94(2), pages 125-141, July.
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