IDEAS home Printed from https://ideas.repec.org/p/nwu/cmsems/885.html
   My bibliography  Save this paper

Location Equilibria Under Alternative Solution Concepts

Author

Listed:
  • Simon P. Anderson

Abstract

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.

Suggested Citation

  • Simon P. Anderson, 1989. "Location Equilibria Under Alternative Solution Concepts," Discussion Papers 885, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:885
    as

    Download full text from publisher

    File URL: http://www.kellogg.northwestern.edu/research/math/papers/885.pdf
    File Function: main text
    Download Restriction: no

    References listed on IDEAS

    as
    1. Anderson, Simon P, 1988. "Equilibrium Existence in the Linear Model of Spatial Competition," Economica, London School of Economics and Political Science, vol. 55(220), pages 479-491, November.
    2. 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.
    3. 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.
    4. 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).
    5. Novshek, William, 1980. "Equilibrium in simple spatial (or differentiated product) models," Journal of Economic Theory, Elsevier, vol. 22(2), pages 313-326, April.
    6. 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.
    7. 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.
    8. 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)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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). General contact details of provider: http://edirc.repec.org/data/cmnwuus.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.