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On the Existence of Nash Equilibria in Two-Sided Hotelling Models

Author

Listed:
  • Emanuele Bacchiega

    (Department of Computer Science and Engineering, University of Bologna, Italy)

  • Elias Carroni

    (Department of Economics, University of Bologna, Italy)

  • Alessandro Fedele

    (Faculty of Economics and Management, Free University of Bozen-Bolzano, Italy)

Abstract

The Hotelling model is the workhorse for analyzing platform competition in two-sided markets. In this setup, the degree of platform differentiation must be high relative to cross-group benefits to eschew the alleged non-existence of Nash equilibria. The present paper shows instead that Nash equilibria exist even for relatively low differentiation; at such equilibria, platforms avoid competition by replicating a collusive outcome. This result widens our knowledge of the two-sided Hotelling model and is relevant for a large array of markets --especially digital ones-- where platforms operate in relatively low-differentiation environments.

Suggested Citation

  • Emanuele Bacchiega & Elias Carroni & Alessandro Fedele, 2024. "On the Existence of Nash Equilibria in Two-Sided Hotelling Models," BEMPS - Bozen Economics & Management Paper Series BEMPS106, Faculty of Economics and Management at the Free University of Bozen.
    • Handle: RePEc:bzn:wpaper:bemps106
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    File URL: https://repec.unibz.it/bemps106.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Hotelling model; Platform competition; Two-sided markets; Equilibrium existence.;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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