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A Duopoly Location Toolkit: Consumer Densities Which Yield Unique Spatial Duopoly Equilibria

Author

Listed:
  • Meagher Kieron J

    () (University of New South Wales)

  • Teo Ernie G.S.

    () (Nanyang Technological University)

  • Wang Wen

    () (University of New South Wales)

Abstract

Anderson, Goeree and Ramer (1997) observe that although the Uniform consumer density is almost universally assumed in Hotelling style location games, it is more realistic to assume non-uniform distributions. Using Anderson et al.'s (1997) sufficient conditions for the existence of a unique pure strategy equilibrium, we extend the list of known distributions with characterised equilibria from two (Uniform and Triangular) to seven. Our extension includes the Normal and Logistic distributions which are commonly used in empirical research. We also analyse the effects of density choice on equilibrium outcomes. Holding the mean and dispersion of consumer tastes constant, we find that the Uniform distribution inflates differentiation effects.

Suggested Citation

  • Meagher Kieron J & Teo Ernie G.S. & Wang Wen, 2008. "A Duopoly Location Toolkit: Consumer Densities Which Yield Unique Spatial Duopoly Equilibria," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-23, April.
  • Handle: RePEc:bpj:bejtec:v:8:y:2008:i:1:n:14
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    Citations

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    Cited by:

    1. Król, Michał, 2012. "Product differentiation decisions under ambiguous consumer demand and pessimistic expectations," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 593-604.
    2. Erdmann, Anett, 2014. "Hotelling meets Holmes : the importance of returns to product differentiation and distribution economies for the firm's optimal location choice," UC3M Working papers. Economics we1420, Universidad Carlos III de Madrid. Departamento de Economía.
    3. Sedghi, Nafiseh & Shavandi, Hassan & Abouee-Mehrizi, Hossein, 2017. "Joint pricing and location decisions in a heterogeneous market," European Journal of Operational Research, Elsevier, vol. 261(1), pages 234-246.
    4. Meagher, Kieron J. & Zauner, Klaus G., 2011. "Uncertain spatial demand and price flexibility: A state space approach to duopoly," Economics Letters, Elsevier, vol. 113(1), pages 26-28, October.
    5. David E. Giles & Xiao Ling, 2011. "Bias Reduction for the Maximum Likelihood Estimator of the Parameters of the Generalized Rayleigh Family of Distributions," Econometrics Working Papers 1111, Department of Economics, University of Victoria.

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