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Spatial competition and the core

Author

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  • HAMILTON, John H.
  • MacLEOD, W. Bentley
  • THISSE, Jacques-François

Abstract

Models of spatial competition have proven useful in describing differentiated product markets. A serious problem is the nonexistence of Nash equilibria. This problem is resolved by modelling the price formation process using the core. The equilibrium is the outcome of a two-stage process. In the first stage, two firms choose locations simultaneously. The second stage has prices determined by an allocation in the core of a cooperative subgame allowing for coalitions of buyers and sellers. These prices approach the competitive level as the distance between the firms goes to zero, thus capturing the essence of duopoly rivalry.
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Suggested Citation

  • HAMILTON, John H. & MacLEOD, W. Bentley & THISSE, Jacques-François, 1991. "Spatial competition and the core," LIDAM Reprints CORE 986, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:986
    DOI: 10.2307/2937934
    Note: In : Quarterly Journal of Economics, 106(3), 925-937, 1991
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    Cited by:

    1. Drezner, Zvi & Wesolowsky, George O., 1996. "Location-allocation on a line with demand-dependent costs," European Journal of Operational Research, Elsevier, vol. 90(3), pages 444-450, May.
    2. Ricardo Biscaia & Isabel Mota, 2013. "Models of spatial competition: A critical review," Papers in Regional Science, Wiley Blackwell, vol. 92(4), pages 851-871, November.
    3. Jonathan Vogel, 2011. "Spatial Price Discrimination with Heterogeneous Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 661-676, December.
    4. Chisholm, Darlene C. & Norman, George, 2004. "Heterogeneous preferences and location choice with multi-product firms," Regional Science and Urban Economics, Elsevier, vol. 34(3), pages 321-339, May.
    5. Reisinger, Markus, 2004. "Two-Sided Markets with Negative Externalities," Discussion Papers in Economics 478, University of Munich, Department of Economics.
    6. Jacques-François Thisse & Suzanne Scotchmer, 1993. "Les implications de l'espace pour la concurrence," Revue Économique, Programme National Persée, vol. 44(4), pages 653-670.
    7. Boyer, Marcel & Laffont, Jean-Jacques & Mahenc, Philippe & Moreaux, Michel, 1995. "Sequential Location Equilibria under Incomplete Information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(2), pages 323-350, July.
    8. Eleftheriou, Konstantinos & Michelacakis, Nickolas, 2015. "A Unified Model of Spatial Price Discrimination," MPRA Paper 66557, University Library of Munich, Germany.
    9. Konstantinos Eleftheriou & Nickolas J. Michelacakis, 2020. "Location decisions and welfare under spatial price discrimination," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1202-1210, October.
    10. Darlene C. Chisholm & George Norman, 2002. "Spatial Competition and Demand: An Application to Motion Pictures," Discussion Papers Series, Department of Economics, Tufts University 0216, Department of Economics, Tufts University.
    11. F. William McElroy, 1996. "Alternatives to the U.S. Antitrust Agency Approach to Market Definition," Law and Economics 9606001, University Library of Munich, Germany.
    12. Hamilton, Jonathan & Slutsky, Steven, 2004. "Nonlinear price discrimination with a finite number of consumers and constrained recontracting," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 737-757, June.
    13. Stuart, Harborne Jr., 2004. "Efficient spatial competition," Games and Economic Behavior, Elsevier, vol. 49(2), pages 345-362, November.
    14. Oz Shy, 2024. "Hotelling’s Model with Firms Located Close to Each Other," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 65(3), pages 649-668, November.
    15. Byford, Martin C., 2015. "A theoretical foundation for the undercut-proof equilibrium," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 209-220.
    16. Nikolay Pilnik & Stanislav Radionov & Ilya Tipunin, 2025. "Floor prices for spatially distributed markets," Operational Research, Springer, vol. 25(1), pages 1-28, March.
    17. Martin C. Byford, 2018. "Ex-post price stability with convex costs," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(4), pages 1065-1085, November.
    18. Eleftheriou, Konstantinos & Michelacakis, Nickolas, 2017. "Spatial Price Discrimination and Privatization on Vertically Related Markets," MPRA Paper 76964, University Library of Munich, Germany.
    19. Giulio Bottazzi & Giovanni Dosi & Giorgio Fagiolo, 2001. "On the Ubiquitous Nature of the Agglomeration Economies and their Diverse Determinants: Some Notes," LEM Papers Series 2001/10, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    20. Richard S. Higgins, 1999. "A geometric treatment of discriminatory pricing among spatially competitive suppliers, with antitrust applications," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(8), pages 437-445.
    21. F. William McElroy, 1997. "Alternatives to the U.S. Antitrust Agency Approach to Market Definition," Industrial Organization 9706003, University Library of Munich, Germany.
    22. Jan K. Brueckner & Jacques-FranÁois Thisse & Yves Zenou, 2002. "Local Labor Markets, Job Matching, and Urban Location," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 155-171, February.
    23. Jacopo Perego & Sevgi Yuksel, 2022. "Media Competition and Social Disagreement," Econometrica, Econometric Society, vol. 90(1), pages 223-265, January.
    24. Marcus Berliant & Yves Zenou, 2014. "Labor Differentiation and Agglomeration in General Equilibrium," International Regional Science Review, , vol. 37(1), pages 36-65, January.
    25. A. de Palma & C. Fontan & O. Mekkaoui, 2000. "Trip Timing for Public Transportation : An Empirical Application," Thema Working Papers 2000-19, THEMA (Théorie Economique, Modélisation et Applications), CY Cergy-Paris University, ESSEC and CNRS.

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