Hotelling's Beach with Linear and Quadratic Transportation Costs: Existence of Pure Strategy Equilibria
AbstractIn Hotelling type models consumers have the same transportation cost function. We deviate from this assumption and introduce two consumer types. Some consumers have linear transportation costs, while the others have quadratic transportation costs. If at most half the consumers have linear transportation costs, a subgame perfect equilibrium in pure strategies exists for all symmetric locations. Furthermore, no general principle of differentiation holds. With two consumer types, the equilibrium pattern ranges from maximum to intermediate differentiation. The degree of product differentiation depends on the fraction of consumer types
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Hotelling; Horizontal Product Differentiation; Equilibrium;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-08 (All new papers)
- NEP-COM-2005-10-08 (Industrial Competition)
- NEP-URE-2005-10-08 (Urban & Real Estate Economics)
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