Spatial Competition, Sequential Entry, and Technology choice

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Spatial Competition, Sequential Entry, and Technology choice

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Georg Götz ()

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Georg Götz

Abstract

This article introduces technology choice into a Hotelling model of spatial competition. This yields two entry deterrence devices, as well as complex strategic choices for the firms and a rich of industry structure. Depending on cost parameters and market size, firms may choose to over-invest or to under-invest. Industry structure is typically asymmetric either in terms of the locations chosen or the technologies used or in both. I find excessive entry deterrrence, second-mover advantage as well as delegation of entry deterrence. Both the number of firms and the equilibrium prices may be non-monotonic in market size. Larger markets may exhibit higher prices.

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Paper provided by University of Vienna, Department of Economics in its series Vienna Economics Papers with number 0215.

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Date of creation: Apr 2002
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Handle: RePEc:vie:viennp:0215

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Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-12-17 (All new papers)
NEP-URE-2002-12-17 (Urban & Real Estate Economics)

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Jeffrey R. Campbell & Hugo A. Hopenhayn, 2002. "Market Size Matters," NBER Working Papers 9113, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Jeffrey Campbell, 2000. "Market Size Matters," Econometric Society World Congress 2000 Contributed Papers 1225, Econometric Society. [Downloadable!]
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Roger Ware, 1991. "Entry Deterrence," Working Papers 837, Queen's University, Department of Economics.
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Other versions:
- Donnenfeld, S. & Weber, S., 1991. "Limit Qualities and Entry Deterrence," Papers 92-4, York (Canada) - Department of Economics.
McLean, Richard P. & Riordan, Michael H., 1989. "Industry structure with sequential technology choice," Journal of Economic Theory, Elsevier, vol. 47(1), pages 1-21, February. [Downloadable!] (restricted)
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Other versions:
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Gupta, Barnali, 1992. "Sequential entry and deterrence with competitive spatial price discrimination," Economics Letters, Elsevier, vol. 38(4), pages 487-490, April. [Downloadable!] (restricted)
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Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October. [Downloadable!] (restricted)
Other versions:
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Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July. [Downloadable!] (restricted)
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