Price Competition on Graphs
AbstractThis paper extends Hotelling's model of price competition with quadratic transportation costs from a line to graphs. I propose an algorithm to calculate firm-level demand for anygiven graph, conditional on prices and firm locations. These graph models of price competitionmay lead to spatial discontinuities in firm-level demand. I show that the existence resultof D'Aspremont et al. (1979) does not extend to simple star graphs and I conjecture thatthis non-existence result holds more generally for all graph models with two or more firmsthat cannot be reduced to a line or circle.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-126/1.
Date of creation: 13 Dec 2010
Date of revision: 11 Aug 2011
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spatial competition; Hotelling; graphs;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-23 (All new papers)
- NEP-BEC-2010-12-23 (Business Economics)
- NEP-COM-2010-12-23 (Industrial Competition)
- NEP-IND-2010-12-23 (Industrial Organization)
- NEP-MIC-2010-12-23 (Microeconomics)
- NEP-URE-2010-12-23 (Urban & Real Estate Economics)
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- d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, .
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