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Hotelling Meets Weber

Author

Listed:
  • Fu-Chuan Lai

    (Research Center for Humanities and Social Sciences, Academia Sinica)

  • So Kubota

    (Faculty of Economics, University of Tokyo)

Abstract

In this paper, spatial competition between two sellers in a market (Hotelling, 1929) and total transportation costs minimization (Weber, 1909) are combined, and equilibrium and optimum locations of firms are analyzed along with the consequent policy implications. We reveal that when the output prices are fixed and equal, then both firms agglomerate at the market center, irrespective of the distribution of inputs. Further, we also show that the middle point of firm locations in Hotelling's model is identical to the Weber's point. Finally, it is indicated that the location of firms in Hotelling's model is far from the socially optimal location.

Suggested Citation

  • Fu-Chuan Lai & So Kubota, 2011. "Hotelling Meets Weber," CIRJE F-Series CIRJE-F-793, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2011cf793
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2011/2011cf793.pdf
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    References listed on IDEAS

    as
    1. M Birkin & A G Wilson, 1986. "Industrial Location Models 2: Weber, Palander, Hotelling, and Extensions within a New Framework," Environment and Planning A, , vol. 18(3), pages 293-306, March.
    2. P. Hansen & J.-F. Thisse & R. E. Wendell, 1986. "Equivalence of Solutions to Network Location Problems," Mathematics of Operations Research, INFORMS, vol. 11(4), pages 672-678, November.
    3. JASKOLD GABSZEWICZ, Jean & THISSE, Jacques-François, 1986. "Spatial competition and the location of firms," LIDAM Reprints CORE 713, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    5. M Birkin & A G Wilson, 1986. "Industrial Location Models 1: A Review and an Integrating Framework," Environment and Planning A, , vol. 18(2), pages 175-205, February.
    6. repec:cor:louvrp:-747 is not listed on IDEAS
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    Cited by:

    1. Guo, Wen-Chung & Lai, Fu-Chuan & Zeng, Dao-Zhi, 2015. "A Hotelling model with production," Mathematical Social Sciences, Elsevier, vol. 73(C), pages 40-49.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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