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Product differentiation and entry timing in a continuous time spatial competition model

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  • Takeshi Ebina
  • Noriaki Matsushima
  • Daisuke Shimizu

Abstract

We extend the well-known spatial competition model (d'Aspremont et al., 1979) to a continuous time model in which two firms compete in each instance. Our focus is on the entry timing decisions of firms and their optimal locations. We demonstrate that the leader has an incentive to locate closer to the centre to delay the follower's entry, leading to a non-maximum differentiation outcome. We also investigate how exogenous parameters affect the leader's location and firms' values and, in particular, numerically show that the profit of the leader changes non-monotonically with an increase in the transport cost parameter.

Suggested Citation

  • Takeshi Ebina & Noriaki Matsushima & Daisuke Shimizu, 2014. "Product differentiation and entry timing in a continuous time spatial competition model," ISER Discussion Paper 0915, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:0915
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    References listed on IDEAS

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    Cited by:

    1. Takeshi Ebina & Noriaki Matsushima, 2017. "Product differentiation and entry timing in a continuous-time spatial competition model with vertical relations," ISER Discussion Paper 1009, Institute of Social and Economic Research, Osaka University.
    2. Takeshi Ebina & Noriaki Matsushima & Katsumasa Nishide, 2017. "Demand uncertainty, product differentiation, and entry timing under spatial competition," ISER Discussion Paper 1007, Institute of Social and Economic Research, Osaka University.

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