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Equilibrium existence in the Hotelling model with convex production costs

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  • Dragone, Davide
  • Lambertini, Luca

Abstract

We revisit the spatial duopoly model à la Hotelling (1929), to show that, provided the parameter scaling marginal cost is sufficiently high, quadratic production costs guarantee equilibrium existence in presence of linear transportation costs and a uniform distribution, with minimum product differentiation and no undercutting. We also discuss the conditions under which partial coverage arises. Finally, we extend the duopoly game to generalise the condition for the existence of the pure-strategy equilibrium to a class of convex production cost functions.

Suggested Citation

  • Dragone, Davide & Lambertini, Luca, 2020. "Equilibrium existence in the Hotelling model with convex production costs," Regional Science and Urban Economics, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:regeco:v:84:y:2020:i:c:s0166046220302532
    DOI: 10.1016/j.regsciurbeco.2020.103568
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    Cited by:

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    4. John S. Heywood & Dongyang Li & Guangliang Ye, 2022. "Mixed duopoly under hotelling with convex production costs," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 69(2), pages 487-510, October.

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    More about this item

    Keywords

    Horizontal differentiation; Spatial competition; Price competition; Equilibrium existence;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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