A Hotelling style model of spatial competition for a convenience good
AbstractOrdinarily people do not make special purpose trips to acquire goods like gasoline or groceries but instead buy them as the need arises in the course of their daily lives. Such goods are commonly called convenience goods. We modify Hotelling’s model of spatial competition so that we can analyze the price equilibrium of duopolists that retail a convenience good. Certain features of the duopolists’ demand functions suggest that price competition is more severe in the convenience goods model than in the Hotelling model. The same features complicate the analysis because they mean that a pure strategy price equilibrium does not exist for many locational configurations. Although we are not able to find the mixed strategy price equilibrium analytically, we do present some numerical results on equilibrium prices that broadly confirm this suggestion. We also provide a more general product differentiation interpretation of the convenience good model. Copyright Springer-Verlag 2012
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Bibliographic InfoArticle provided by Springer in its journal The Annals of Regional Science.
Volume (Year): 49 (2012)
Issue (Month): 2 (October)
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Find related papers by JEL classification:
- L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D40 - Microeconomics - - Market Structure and Pricing - - - General
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- Martin J Osborne & Carolyn Pitchik, 1985. "Equilibrium in Hotelling's Model of Spatial Competition," Department of Economics Working Papers 1985-02, McMaster University.
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