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Stationary and nonstationary strategies in Hotelling's model of spatial competition with repeated pricing decisions

Author

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  • Kali P. Rath

    (Department of Economics, University of Notre Dame, Notre Dame, IN 46556, USA)

Abstract

This paper examines Hotelling's model of location with linear transportation cost. Existence of pure strategy subgame perfect equilibria in the infinitely repeated price game with fixed locations is proved. These subgame perfect equilibria have a stick and carrot structure. Given firm locations, there are discount factors sufficiently high that there is a subgame perfect equilibrium with a two-phase structure. Given the discount factors, there are stationary subgame perfect equilibria for a wide range of locations. However, for some pairs of location, no symmetric simple penal code exists, all subgame perfect profiles are nonstationary, and there is only one seller in the market in infinitely many periods.

Suggested Citation

  • Kali P. Rath, 1998. "Stationary and nonstationary strategies in Hotelling's model of spatial competition with repeated pricing decisions," International Journal of Game Theory, Springer;Game Theory Society, vol. 27(4), pages 525-537.
    • Handle: RePEc:spr:jogath:v:27:y:1998:i:4:p:525-537
    Note: Received July 1996/Final version May 1998
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    Citations

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    Cited by:

    1. Haan, Marco A. & Toolsema, Linda A., 2005. "The Effects of Cartelization on Product Design," Research Report 05F02, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    2. repec:dgr:rugsom:05f02 is not listed on IDEAS
    3. Kali P. Rath & Gongyun Zhao, 2021. "On the insufficiency of some conditions for minimal product differentiation," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(1), pages 53-65, April.
    4. Osterdal, Lars Peter, 2003. "A note on the stability of collusion in differentiated oligopolies," Research in Economics, Elsevier, vol. 57(1), pages 53-64, March.

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