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Hotelling's Beach with Linear and Quadratic Transportation Costs: Existence of Pure Strategy Equilibria

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  • Alain Egli

Abstract

In Hotelling type models consumers have the same transportation cost function. We deviate from this assumption and introduce two consumer types. Some consumers have linear transportation costs, while the others have quadratic transportation costs. If at most half the consumers have linear transportation costs, a subgame perfect equilibrium in pure strategies exists for all symmetric locations. Furthermore, no general principle of differentiation holds. With two consumer types, the equilibrium pattern ranges from maximum to intermediate differentiation. The degree of product differentiation depends on the fraction of consumer types

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  • Alain Egli, 2005. "Hotelling's Beach with Linear and Quadratic Transportation Costs: Existence of Pure Strategy Equilibria," Diskussionsschriften dp0509, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp0509
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    1. Anderson, S., 1986. "Equilibrium existence in the linear model of spatial competition," LIDAM Discussion Papers CORE 1986013, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    3. 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.
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    5. X. Henry Wang & Bill Z. Yang, 1999. "On Hotelling's Location Model With a Restricted Reservation Price," Australian Economic Papers, Wiley Blackwell, vol. 38(3), pages 259-275, September.
    6. Hinloopen, Jeroen & van Marrewijk, Charles, 1999. "On the limits and possibilities of the principle of minimum differentiation1," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 735-750, July.
    7. Economides, Nicholas, 1984. "The principle of minimum differentiation revisited," European Economic Review, Elsevier, vol. 24(3), pages 345-368, April.
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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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