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Price Competition on Graphs

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  • Adriaan R. Soetevent

    (University of Amsterdam)

Abstract

This 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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File URL: http://papers.tinbergen.nl/10126.pdf
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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-126/1.

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Date of creation: 13 Dec 2010
Date of revision: 11 Aug 2011
Handle: RePEc:dgr:uvatin:20100126

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Web page: http://www.tinbergen.nl

Related research

Keywords: spatial competition; Hotelling; graphs;

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  1. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
  2. von Ungern-Sternberg, Thomas, 1991. "Monopolistic Competition on the Pyramid," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 355-68, June.
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Cited by:
  1. de Roos, Nicolas, 2012. "Static models of the Edgeworth cycle," Economics Letters, Elsevier, vol. 117(3), pages 881-882.

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