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Location-Price Equilibria when Traditional Retailers Compete Against an Online Retailer

Author

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  • Stefano Colombo

    (Università Cattolica del Sacro Cuore)

  • Zemin Hou

    (Northeastern University)

Abstract

We consider a location-then-price game where two traditional retailers compete with a location-irrelevant online retailer. We characterize the existing equilibria, and we show that in any possible equilibrium there is direct competition between the traditional retailers. Furthermore, the traditional retailers locate at neither a maximal nor minimal distance. In equilibrium, the price of the online retailer might be higher or lower than the price of the traditional retailers, depending on the relative competitiveness of the online retailer and the traditional retailers.

Suggested Citation

  • Stefano Colombo & Zemin Hou, 2021. "Location-Price Equilibria when Traditional Retailers Compete Against an Online Retailer," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(3), pages 483-502, November.
    • Handle: RePEc:kap:revind:v:59:y:2021:i:3:d:10.1007_s11151-021-09814-1
    DOI: 10.1007/s11151-021-09814-1
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