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Löschian competition under demand uncertainty

Author

Listed:
  • Biing‐Shiunn Yang
  • Chao‐Cheng Mai

Abstract

This purpose of this paper is twofold: First, we are interested in making a first step towards formally introducing demand uncertainty into the standard model of Löschian competition. Secondly, we wish to explore the effects of demand uncertainty on both the nature of the solution and comparative statics relating to the equilibrium price and market area. Several striking results are derived and then compared with those derived by Capozza and Van Order (1978), Benson (1980), Appelbaum and Katz (1986) and Ishii (1991). Resumen El propósito de este artículo es doble: Primero, nos interesa dar el primer paso hacia presentar formalmente la incertidumbre de la demanda dentro del modelo estándar de competencia de Lösch. Segundo, queremos explorar los efectos de la incertidumbre de la demanda tanto en la naturaleza de la solución como en estática comparativa relacionada con el precio de equilibrio y el área de mercado. Se obtienen varios resultados sorprendentes los cuales se comparan a continuación con los obtenidos por Capozza y Van Order (1978), Benson (1980), Appelbaum y Katz (1986) e Ishii (1991).

Suggested Citation

  • Biing‐Shiunn Yang & Chao‐Cheng Mai, 2009. "Löschian competition under demand uncertainty," Papers in Regional Science, Wiley Blackwell, vol. 88(4), pages 765-784, November.
  • Handle: RePEc:bla:presci:v:88:y:2009:i:4:p:765-784
    DOI: 10.1111/j.1435-5957.2009.00235.x
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    File URL: https://doi.org/10.1111/j.1435-5957.2009.00235.x
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    References listed on IDEAS

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    1. Mai, Chao-cheng, 1981. "Optimum location and the theory of the firm under demand uncertainty," Regional Science and Urban Economics, Elsevier, vol. 11(4), pages 549-557, November.
    2. Balvers, Ronald & Szerb, Lazlo, 1996. "Location in the Hotelling duopoly model with demand uncertainty," European Economic Review, Elsevier, vol. 40(7), pages 1453-1461, August.
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    4. Ohta, H., 1980. "Spatial competition, concentration and welfare," Regional Science and Urban Economics, Elsevier, vol. 10(1), pages 3-16, March.
    5. Capozza, Dennis R & Van Order, Robert, 1977. "Pricing under Spatial Competition and Spatial Monopoly," Econometrica, Econometric Society, vol. 45(6), pages 1329-1338, September.
    6. Ishii, Yasunori, 1989. "Measures of Risk Aversion and Comparative Statics of Industry Equilibrium: Correction," American Economic Review, American Economic Association, vol. 79(1), pages 285-286, March.
    7. Greenhut, M L & Hwang, M & Ohta, H, 1975. "Observations on the Shape and Relevance of the Spatial Demand Function," Econometrica, Econometric Society, vol. 43(4), pages 669-682, July.
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    12. repec:ulb:ulbeco:2013/1759 is not listed on IDEAS
    13. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
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