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Hotelling'S Beach With Linear And Quadratic Transportation Costs: Existence Of Pure Strategy Equilibria

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Abstract

In 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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  • Alain Egli, 2007. "Hotelling'S Beach With Linear And Quadratic Transportation Costs: Existence Of Pure Strategy Equilibria," Australian Economic Papers, Wiley Blackwell, vol. 46(1), pages 39-51, March.
    • Handle: RePEc:bla:ausecp:v:46:y:2007:i:1:p:39-51
    DOI: 10.1111/j.1467-8454.2007.00304.x
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    Cited by:

    1. Takanori Ago, 2023. "Utility function and location in the Hotelling game," Letters in Spatial and Resource Sciences, Springer, vol. 16(1), pages 1-9, December.
    2. Alan Roncoroni & Matus Medo, 2016. "Spatial firm competition in two dimensions with linear transportation costs: simulations and analytical results," Papers 1609.04944, arXiv.org.
    3. Raúl Bajo-Buenestado, 2021. "Market prices, spatial distribution of consumers and firms’ optimal locations in a linear city," Empirical Economics, Springer, vol. 61(1), pages 443-467, July.

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