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Product differentiation and entry timing in a continuous time spatial competition model

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  • Takeshi Ebina
  • Noriaki Matsushima
  • Daisuke Shimizu

Abstract

We extend the well-known spatial competition model (d'Aspremont et al., 1979) to a continuous time model in which two firms compete in each instance. Our focus is on the entry timing decisions of firms and their optimal locations. We demonstrate that the leader has an incentive to locate closer to the centre to delay the follower's entry, leading to a non-maximum differentiation outcome. We also investigate how exogenous parameters affect the leader's location and firms' values and, in particular, numerically show that the profit of the leader changes non-monotonically with an increase in the transport cost parameter.

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  • Takeshi Ebina & Noriaki Matsushima & Daisuke Shimizu, 2014. "Product differentiation and entry timing in a continuous time spatial competition model," ISER Discussion Paper 0915, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0915
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    3. Matsui, Kenji, 2019. "A supply chain member should set its margin later if another member's cost is highly uncertain," European Journal of Operational Research, Elsevier, vol. 275(1), pages 127-138.
    4. Takeshi Ebina & Noriaki Matsushima & Katsumasa Nishide, 2017. "Demand uncertainty, product differentiation, and entry timing under spatial competition," ISER Discussion Paper 1007, Institute of Social and Economic Research, Osaka University.
    5. Culda, Loredana Camelia & Kaslik, Eva & Neamţu, Mihaela, 2022. "Stability and bifurcations in a general Cournot duopoly model with distributed time delays," Chaos, Solitons & Fractals, Elsevier, vol. 162(C).
    6. Ebina, Takeshi & Matsushima, Noriaki & Nishide, Katsumasa, 2022. "Demand uncertainty, product differentiation, and entry timing under spatial competition," European Journal of Operational Research, Elsevier, vol. 303(1), pages 286-297.
    7. Sun, Chia-Hung, 2023. "Timing of technology adoption in the presence of patent licensing," Economic Modelling, Elsevier, vol. 127(C).
    8. Wang, Wei & Lyu, Gaoyan, 2020. "Sequential product positioning on a platform in the presence of network effects," International Journal of Production Economics, Elsevier, vol. 229(C).
    9. Zhibing Lin, 2019. "Price and location competition in supply chain with horizontal altruistic retailers," Flexible Services and Manufacturing Journal, Springer, vol. 31(2), pages 255-278, June.
    10. Shuxiao Sun & Xiaona Zheng & Huaqing Hu & Tao Huang, 2023. "Spatial competition and social welfare considering different feasible location regions," Journal of Economics, Springer, vol. 138(1), pages 17-50, January.

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