A Hotelling style model of spatial competition for a convenience good
Ordinarily people do not make special purpose trips to acquire goods like gasoline or groceries but instead buy them as the need arises in the course of their daily lives. Such goods are commonly called convenience goods. We modify Hotelling’s model of spatial competition so that we can analyze the price equilibrium of duopolists that retail a convenience good. Certain features of the duopolists’ demand functions suggest that price competition is more severe in the convenience goods model than in the Hotelling model. The same features complicate the analysis because they mean that a pure strategy price equilibrium does not exist for many locational configurations. Although we are not able to find the mixed strategy price equilibrium analytically, we do present some numerical results on equilibrium prices that broadly confirm this suggestion. We also provide a more general product differentiation interpretation of the convenience good model. Copyright Springer-Verlag 2012
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Volume (Year): 49 (2012)
Issue (Month): 2 (October)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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- d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, "undated". "On Hotelling's "Stability in competition"," CORE Discussion Papers RP 385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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