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Spatial Duopoly with a Reservation Price

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Author Info

  • Jeroen Hinloopen

    (Institute of Economics, University of Copenhagen)

  • Charles van Marrewijk

    (Erasmus University Rotterdam)

Abstract

Introducing a finite reservation price in Hotelling’s spatial duopoly with linear transportation costs shows that (i) there dose not exist a pure strategy symmetric location equilibrium of the reservation price is 'high’, (ii) there exists a unique pure strategy symmetric location equilibrium (in which the two firms compete with each other and cover the entire market) if the reservation price is 'intermediate’. The equilibrium distance between the two firms in the latter case is at least a quarter and at most half the length of the market.

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 1997-16.

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Length: 31 pages
Date of creation: Mar 1995
Date of revision: May 1996
Handle: RePEc:kud:kuieci:1997-16

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Keywords: spatial duopoly; reservation price;

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