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Sequential Location under one-sided Demand Uncertainty

  • Aurélie Bonein
  • Stéphane Turolla

By entering new market, firms face uncertainty about their potential demand. We depart from the usual Hotelling duopoly model with sequential entry. Firms can locate outside the city and market conditions are common knowledge. Then we introduce one-sided demand uncertainty. It results that demand uncertainty can be seen as a diferentiation force when the first entrant faces demand uncertainty and as an agglomeration force when it is the second entrant. Finally, firm 2's imperfect information implies higher welfare losses.

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File URL: http://www.lameta.univ-montp1.fr/Documents/DR2007-12.pdf
File Function: First version, 2007
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Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 07-12.

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Length: 31 pages
Date of creation: Nov 2007
Date of revision: Nov 2007
Handle: RePEc:lam:wpaper:07-12
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