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Global and local players in a model of spatial competition

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Author Info
Simon Loertscher
Gerd Muehlheusser

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Abstract

We consider Hotelling location games with global and local players. Global players are active in several markets, while local players act in a single market only. The decisive feature is that global players cannot tailor their product to each market but have to choose a location on the Hotelling line that is valid for all markets in which they are active. Obvious examples include the media industry and politics, where competitors typically compete in several markets with basically the same product. We determine equilibrium configurations for simple specifications of such games. We then show that the presence of gp s tends to induce lower product diversity across markets. Finally, when the number of firms is endogenous, we show how gp s may use their location choice as a preemptive device

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Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp0511.

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Date of creation: Sep 2005
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Handle: RePEc:ube:dpvwib:dp0511

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Related research
Keywords: Hotelling location games; spatial competition; multiple markets; product differentiation; diversity; preemption;

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Find related papers by JEL classification:
D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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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. Calvó-Armengol, Antoni & Zenou, Yves, 2001. "The Importance of the Distribution of Consumers in Horizontal Product Differentiation," CEPR Discussion Papers 3031, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Anderson, Simon P. & de Palma, Andre, 2000. "From local to global competition," European Economic Review, Elsevier, vol. 44(3), pages 423-448, March. [Downloadable!] (restricted)
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  3. Gabszewicz, Jean J. & Laussel, Dider & Sonnac, Nathalie, 2001. "Press advertising and the ascent of the 'Pensee Unique'," European Economic Review, Elsevier, vol. 45(4-6), pages 641-651, May. [Downloadable!] (restricted)
  4. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring. [Downloadable!] (restricted)
  5. Irmen, Andreas & Thisse, Jacques-Francois, 1998. "Competition in Multi-characteristics Spaces: Hotelling Was Almost Right," Journal of Economic Theory, Elsevier, vol. 78(1), pages 76-102, January. [Downloadable!] (restricted)
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  6. 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)
  7. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA. [Downloadable!]
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  1. Simon Loertscher & Gerd Muehlheusser, 2008. "Dynamic Location Games," Department of Economics - Working Papers Series 1042, The University of Melbourne. [Downloadable!]
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