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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

Suggested Citation

  • 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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    References listed on IDEAS

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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).
    2. Wang, X Henry & Yang, Bill Z, 1999. "On Hotelling's Location Model with a Restricted Reservation Price," Australian Economic Papers, Wiley Blackwell, vol. 38(3), pages 259-275, September.
    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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    More about this item

    Keywords

    Hotelling; Horizontal Product Differentiation; Equilibrium;
    All these keywords.

    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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