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Spatial competition with quadratic transport costs and one online firm

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  • Wen-Chung Guo
  • Fu-Chuan Lai

Abstract

d’Aspremont (Econometrica 47:1145–1150 , 1979 ) showed that a Hotelling (Econ J 39:41–57 , 1929 ) duopoly model with quadratic transport costs yields maximal differentiation. However, the introducing of an online firm ensures that the duopolist will never be located at the end points of the market. In other words, an online firm can raise a market effect that induces two firms to be finitely differentiated. The implication of the socially optimal solution is derived. The results herein can be extended to allow multiple firms. Finally, a free-entry equilibrium and the Stackelberg equilibrium are also discussed. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Wen-Chung Guo & Fu-Chuan Lai, 2014. "Spatial competition with quadratic transport costs and one online firm," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(1), pages 309-324, January.
    • Handle: RePEc:spr:anresc:v:52:y:2014:i:1:p:309-324
    DOI: 10.1007/s00168-013-0586-9
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    8. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
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    Cited by:

    1. Drezner, Zvi & Eiselt, H.A., 2024. "Competitive location models: A review," European Journal of Operational Research, Elsevier, vol. 316(1), pages 5-18.
    2. Vladimir Marianov & H. A. Eiselt & Armin Lüer-Villagra, 2020. "The Follower Competitive Location Problem with Comparison-Shopping," Networks and Spatial Economics, Springer, vol. 20(2), pages 367-393, June.
    3. 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.
    4. Stefano Colombo & Zemin Hou, 2019. "On spatial competition with quadratic transport costs and one online firm," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(1), pages 241-247, August.
    5. Stefano Colombo & Noriaki Matsushima, 2020. "Competition Between Offline and Online Retailers with Heterogeneous Customers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 647-664, November.
    6. H. A. Eiselt & Vladimir Marianov, 2020. "Stability of utility functions and apportionment rules in location models," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 28(3), pages 772-792, October.

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    More about this item

    Keywords

    R32; L13; C62;
    All these keywords.

    JEL classification:

    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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