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Spatial Duopoly with a Reservation Price

Author

Listed:
  • Jeroen Hinloopen

    (Institute of Economics, University of Copenhagen)

  • Charles van Marrewijk

    (Erasmus University Rotterdam)

Abstract

Introducing a finite reservation price in Hotelling’s spatial duopoly with linear transportation costs shows that (i) there dose not exist a pure strategy symmetric location equilibrium of the reservation price is 'high’, (ii) there exists a unique pure strategy symmetric location equilibrium (in which the two firms compete with each other and cover the entire market) if the reservation price is 'intermediate’. The equilibrium distance between the two firms in the latter case is at least a quarter and at most half the length of the market.

Suggested Citation

  • Jeroen Hinloopen & Charles van Marrewijk, 1995. "Spatial Duopoly with a Reservation Price," CIE Discussion Papers 1997-16, University of Copenhagen. Department of Economics. Centre for Industrial Economics, revised Jul 1997.
  • Handle: RePEc:kud:kuieci:1997-16
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    More about this item

    Keywords

    spatial duopoly; reservation price;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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