IDEAS home Printed from https://ideas.repec.org/a/spr/anresc/v52y2014i1p309-324.html
   My bibliography  Save this article

Spatial competition with quadratic transport costs and one online firm

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00168-013-0586-9
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s00168-013-0586-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Karen Clay & Ramayya Krishnan & Eric Wolff & Danny Fernandes, 2002. "Retail Strategies on the Web: Price and Non–price Competition in the Online Book Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 351-367, September.
    2. repec:bla:jindec:v:45:y:1997:i:3:p:329-40 is not listed on IDEAS
    3. Bouckaert, Jan, 2000. "Monopolistic competition with a mail order business," Economics Letters, Elsevier, vol. 66(3), pages 303-310, March.
    4. Wolinsky, Asher, 1987. "Brand Names and Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 35(3), pages 255-268, March.
    5. repec:bla:jindec:v:50:y:2002:i:3:p:351-67 is not listed on IDEAS
    6. Prince, Jeffrey T., 2007. "The beginning of online/retail competition and its origins: An application to personal computers," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 139-156, February.
    7. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    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.
    9. repec:bla:econom:v:55:y:1988:i:220:p:479-91 is not listed on IDEAS
    10. H. A. Eiselt, 2011. "Equilibria in Competitive Location Models," International Series in Operations Research & Management Science, in: H. A. Eiselt & Vladimir Marianov (ed.), Foundations of Location Analysis, chapter 0, pages 139-162, Springer.
    11. Sridhar Balasubramanian, 1998. "Mail versus Mall: A Strategic Analysis of Competition between Direct Marketers and Conventional Retailers," Marketing Science, INFORMS, vol. 17(3), pages 181-195.
    12. Hinloopen, Jeroen & van Marrewijk, Charles, 1999. "On the limits and possibilities of the principle of minimum differentiation1," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 735-750, July.
    13. Economides, Nicholas, 1984. "The principle of minimum differentiation revisited," European Economic Review, Elsevier, vol. 24(3), pages 345-368, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elizalde, Javier, 2013. "Competition in multiple characteristics: An empirical test of location equilibrium," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 938-950.
    2. Mark Lijesen, 2013. "Hotelling’s webshop," Journal of Economics, Springer, vol. 109(2), pages 193-200, June.
    3. Kelemen, József, 2017. "Több piacra épülő webáruház térbeli árversenye [Spatial price competition for a web shop built on several markets]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 612-629.
    4. Eveline Leeuwen & Mark Lijesen, 2016. "Agents playing Hotelling’s game: an agent-based approach to a game theoretic model," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 57(2), pages 393-411, November.
    5. Wen-Chung Guo & Fu-Chuan Lai, 2017. "Prices, Locations and Welfare When an Online Retailer Competes with Heterogeneous Brick-and-Mortar Retailers," Journal of Industrial Economics, Wiley Blackwell, vol. 65(2), pages 439-468, June.
    6. Alain Egli, 2005. "Hotelling's Beach with Linear and Quadratic Transportation Costs: Existence of Pure Strategy Equilibria," Diskussionsschriften dp0509, Universitaet Bern, Departement Volkswirtschaft.
    7. Kelemen, József, 2020. "Szimultán Hotelling-modell Cobb-Douglas-hasznosságfüggvénnyel [A simultaneous Hotelling model with a Cobb-Douglas utility function]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 14-30.
    8. Yunus Aksoy & Hanno Lustig, 2007. "Exchange Rates, Prices And International Trade In A Model Of Endogenous Market Structure," Manchester School, University of Manchester, vol. 75(2), pages 160-192, March.
    9. Mingming Shi & Jun Zhou & Zhou Jiang, 2019. "Consumer heterogeneity and online vs. offline retail spatial competition," Frontiers of Business Research in China, Springer, vol. 13(1), pages 1-19, December.
    10. Javier Elizalde & Markus Kinateder & Ignacio Rodríguez-Carreño, 2015. "Entry regulation, firm’s behaviour and social welfare," European Journal of Law and Economics, Springer, vol. 40(1), pages 13-31, August.
    11. Ralph Braid, 2014. "The socially optimal and equilibrium locations of two stores or libraries with consumer search," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 123-136, August.
    12. Tharakan, Joe & Thisse, Jacques-Francois, 2002. "The importance of being small. Or when countries are areas and not points," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 381-408, May.
    13. THARAKAN, Joe & THISSE, Jacques-François, 2000. "The importance of being small : size effects in international trade," LIDAM Discussion Papers CORE 2000001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    14. Nakayama, Yuji, 2009. "The impact of e-commerce: It always benefits consumers, but may reduce social welfare," Japan and the World Economy, Elsevier, vol. 21(3), pages 239-247, August.
    15. Fraser Summerfield, 2016. "Matching Skill and Tasks: Cyclical Fluctuations in the Overqualification of New Hires," Working Paper series 16-08, Rimini Centre for Economic Analysis.
    16. Hinloopen, Jeroen & Müller, Wieland & Normann, Hans-Theo, 2014. "Output commitment through product bundling: Experimental evidence," European Economic Review, Elsevier, vol. 65(C), pages 164-180.
    17. Haiyan Wang & Tatsuhiko Nariu, 2012. "Distribution Channel Management in an Internet Age: Equilibrium and Social Welfare," Journal of Industry, Competition and Trade, Springer, vol. 12(3), pages 285-298, September.
    18. Graubner, Marten & Balmann, Alfons & Sexton, Richard J., 2011. "Spatial Pricing and the Location of Processors in Agricultural Markets," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114601, European Association of Agricultural Economists.
    19. Simon Cowan & Xiangkang Yin, 2008. "Competition Can Harm Consumers," Australian Economic Papers, Wiley Blackwell, vol. 47(3), pages 264-271, September.
    20. Alain Egli, 2005. "On Stability in Competition: Tying and Horizontal Product Differentiation," Diskussionsschriften dp0501, Universitaet Bern, Departement Volkswirtschaft.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:anresc:v:52:y:2014:i:1:p:309-324. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.