Location Equilibria Under Alternative Solution Concepts
We provide a comparison of the location equilibria in a duopoly model under three alternative solution concepts. The first one is a simultaneous price and location game, the second is a two-stage location-then-price game. Third, we introduce a new solution concept, a two-stage price-then-location game. It is well known that no (pure strategy) equilibrium usually exists under the first two solution concepts when products are homogenous. We show this is also true for the third concept. However, introducing sufficient product heterogeneity in a specific manner restores the existence of equilibrium in each case. We argue that, under certain "regularity" conditions, equilibrium locations are farther apart under the location-then-price game than in the simultaneous game. We provide simulation results for a specific functional form (the logit model) which illustrates this result, and show that locations in the price-then-location game may be either closer or farther from the center than simultaneous game. Another contribution of the paper is to introduce a no-purchase option into the logit model of spatial competition.
|Date of creation:||Nov 1989|
|Contact details of provider:|| Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014|
Web page: http://www.kellogg.northwestern.edu/research/math/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anderson, Simon P, 1988.
"Equilibrium Existence in the Linear Model of Spatial Competition,"
London School of Economics and Political Science, vol. 55(220), pages 479-491, November.
- Anderson, S., 1986. "Equilibrium existence in the linear model of spatial competition," CORE Discussion Papers 1986013, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- David J. Salant, 1986. "Equilibrium in a Spatial Model of Imperfect Competition with Sequential Choice of Locations and Quantities," Canadian Journal of Economics, Canadian Economics Association, vol. 19(4), pages 685-715, November.
- Friedman, James, 1993. "Oligopoly theory," Handbook of Mathematical Economics,in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 11, pages 491-534 Elsevier.
- Friedman,James, 1983. "Oligopoly Theory," Cambridge Books, Cambridge University Press, number 9780521282444, August.
- ANDERSON, S.P. & de PALMA, A. & THISSE, J.-F., 1987. "Spatial price policies and duopoly," CORE Discussion Papers 1987037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Novshek, William, 1980. "Equilibrium in simple spatial (or differentiated product) models," Journal of Economic Theory, Elsevier, vol. 22(2), pages 313-326, April.
- Eaton, B Curtis & Lipsey, Richard G, 1978. "Freedom of Entry and the Existence of Pure Profit," Economic Journal, Royal Economic Society, vol. 88(351), pages 455-469, September.
- Jonathan H Hamilton & James F. Klein & Eytan Sheshinski & Steven M. Slutsky, 1994. "Quantity Competition in a Spatial Model," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 903-917, November.
- Simon P. Anderson & André De Palma, 1988. "Spatial Price Discrimination with Heterogeneous Products," Review of Economic Studies, Oxford University Press, vol. 55(4), pages 573-592. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nwu:cmsems:885. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fran Walker)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.