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Instability in Competition: Hotelling Re-reconsidered

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  • Helge Sanner

Abstract

In this paper we show that Puu (2002) does not provide a stable solution to the location game, according to his own definition of stability. If the usual two-stage game is considered, where in the first stage a location is chosen once and forever, and in the second stage prices are determined, the equilibrium proves stable for a sizeable interval of parameters, however. Even though this procedure is most common in analyzing Hotelling's location problem, it is not satisfying because it exhibits an inconsistent informational structure. The search for a better concept of stability is imperative.

Suggested Citation

  • Helge Sanner, 2005. "Instability in Competition: Hotelling Re-reconsidered," Volkswirtschaftliche Diskussionsbeiträge 79, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
  • Handle: RePEc:pot:vwldis:79
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    File URL: http://nbn-resolving.de/urn:nbn:de:kobv:517-opus-14299
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    References listed on IDEAS

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    1. Ingo Christoph, 1995. "Anforderungen an eine standortgerechte Verkehrspolitik in der Bundesrepublik Deutschland," Volkswirtschaftliche Diskussionsbeiträge 02, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
    2. Martin Franke, 1995. "Die Reduktion der CO2-Emissionen durch Zertifikate?," Volkswirtschaftliche Diskussionsbeiträge 04, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
    3. Dieter Kreikenbaum, 1996. "Kommunalisierung und Dezentralisierung der leitungsgebundenen Energieversorgung," Volkswirtschaftliche Diskussionsbeiträge 10, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
    4. Helge Sanner & Klaus Schöler, 1997. "Competition, Price Discrimination and Two-Dimensional Distrubution of Demand," Volkswirtschaftliche Diskussionsbeiträge 12, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
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    Citations

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    Cited by:

    1. Gallay, Olivier & Hongler, Max-Olivier, 2008. "Market sharing dynamics between two service providers," European Journal of Operational Research, Elsevier, vol. 190(1), pages 241-254, October.
    2. Adriaan Hendrik van der Weijde & Erik T. Verhoef & Vincent A. C. van den Berg, 2012. "Hotelling Models with Price-Sensitive Demand and Asymmetric Transport Costs: An Application to Public Transport Scheduling," Tinbergen Institute Discussion Papers 12-119/VIII, Tinbergen Institute.
    3. Albrecht Kauffmann, 2007. "Transport Costs and the Size of Cities : the Case of Russia," Volkswirtschaftliche Diskussionsbeiträge 93, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
    4. Klaus Schöler, 2007. "Gibt es eine optimale Stadtgröße?," Volkswirtschaftliche Diskussionsbeiträge 89, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.

    More about this item

    Keywords

    Hotelling's main street; Instability of equilibrium;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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