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Competition by choice

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Author Info
Marc Dudey

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Abstract

This paper relates firm location choice and consumer search. Firms that cluster together attract consumers by facilitating price comparison, but clustering increases the intensity of local competition. I construct a simple model which shows that firms may choose head-on competition by locating together. In special cases, this can be the unique equilibrium outcome. I also use the model to show that price setting firms may earn more in equilibrium than quantity setting firms.

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Publisher Info
Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 327.

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Date of creation: 1988
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Handle: RePEc:fip:fedgif:327

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Related research
Keywords: Competition ; Consumer behavior ; Business enterprises;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  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. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. Stahl, Konrad, 1982. "Differentiated Products, Consumer Search, and Locational Oligopoly," Journal of Industrial Economics, Blackwell Publishing, vol. 31(1-2), pages 97-113, September. [Downloadable!] (restricted)
  4. Joseph Farrell & Garth Saloner, 1984. "Standardization, Compatibility and Innovation," Working papers 345, Massachusetts Institute of Technology (MIT), Department of Economics.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Angela Chang & Shubham Chaudhuri & Jith Jayaratne, 1997. "Rational herding and the spatial clustering of bank branches: an empirical analysis," Research Paper 9724, Federal Reserve Bank of New York. [Downloadable!]
  2. Hideo Konishi & Michael Sandfort, 2001. "Anchor Stores," Boston College Working Papers in Economics 516, Boston College Department of Economics, revised 14 Nov 2002. [Downloadable!]
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  3. Catherine Tucker & Juanjuan Zhang, 2008. "Decomposing the Congestion Effect and the Cross-Platform Effect in Two-Sided Networks: A Field Experiment," Working Papers 08-12, NET Institute, revised Oct 2008. [Downloadable!]
  4. Michael Sandfort & Hideo Konishi, 2000. "Expanding Demand through Price Advertisement," Boston College Working Papers in Economics 453, Boston College Department of Economics, revised 21 Jun 2001. [Downloadable!]
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  5. Hideo Konishi, 1999. "Concentration of Competing Retail Stores," Boston College Working Papers in Economics 447, Boston College Department of Economics. [Downloadable!]
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This page was last updated on 2009-11-18.

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