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Hotelling competition with behaviourally-confused vendors

Author

Listed:
  • Richard Fairchild

    (School of Management, University of Bath)

  • Graham Mallard

    (Visting Scholar, Department of Economics, University of Bath)

Abstract

We consider a Hotelling spatial competition model, in which two vendors simultaneously decide, firstly, on location, and, secondly, on price. We assume quadratic transportation costs, so that the vendors would locate at maximum distance in equilibrium. However, we introduce a counter-acting behavioural/psychological/emotional 'attraction' factor that 'confuses' the vendors and pulls them together. We examine the combined effects of economic price-softening driving the vendors apart, versus behavioural attraction, on the vendors' location decision.

Suggested Citation

  • Richard Fairchild & Graham Mallard, 2017. "Hotelling competition with behaviourally-confused vendors," Economics Bulletin, AccessEcon, vol. 37(3), pages 1450-1456.
  • Handle: RePEc:ebl:ecbull:eb-17-00132
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    More about this item

    Keywords

    Hotelling spatial competition; quadratic transportation costs; economic price-softening; behavioural attraction; location decision.;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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