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Spatial Competition, Sequential Entry, and Technology choice

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Abstract

This article introduces technology choice into a Hotelling model of spatial competition. This yields two entry deterrence devices, as well as complex strategic choices for the firms and a rich of industry structure. Depending on cost parameters and market size, firms may choose to over-invest or to under-invest. Industry structure is typically asymmetric either in terms of the locations chosen or the technologies used or in both. I find excessive entry deterrrence, second-mover advantage as well as delegation of entry deterrence. Both the number of firms and the equilibrium prices may be non-monotonic in market size. Larger markets may exhibit higher prices.

Suggested Citation

  • Georg Götz, 2002. "Spatial Competition, Sequential Entry, and Technology choice," Vienna Economics Papers 0215, University of Vienna, Department of Economics.
  • Handle: RePEc:vie:viennp:0215
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    References listed on IDEAS

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    1. Roger Ware, 1991. "Entry Deterrence," Working Papers 837, Queen's University, Department of Economics.
    2. McLean, Richard P. & Riordan, Michael H., 1989. "Industry structure with sequential technology choice," Journal of Economic Theory, Elsevier, vol. 47(1), pages 1-21, February.
    3. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
    4. Tabuchi, Takatoshi & Thisse, Jacques-Francois, 1995. "Asymmetric equilibria in spatial competition," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 213-227.
    5. Pepall, Lynne, 1992. "Strategic Product Choice and Niche Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(2), pages 397-417, Summer.
    6. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    7. Gupta, Barnali, 1992. "Sequential entry and deterrence with competitive spatial price discrimination," Economics Letters, Elsevier, vol. 38(4), pages 487-490, April.
    8. Drew Fudenberg & Jean Tirole, 1985. "Preemption and Rent Equalization in the Adoption of New Technology," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 383-401.
    9. Jeffrey R. Campbell & Hugo A. Hopenhayn, 2005. "Market Size Matters," Journal of Industrial Economics, Wiley Blackwell, vol. 53(1), pages 1-25, March.
    10. Church, Jeffrey & Ware, Roger, 1996. "Delegation, market share and the limit price in sequential entry models," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 575-609, July.
    11. Shabtai Donnenfeld & Shlomo Weber, 1995. "Limit Qualities and Entry Deterrence," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 113-130, Spring.
    12. Schulz, Norbert & Stahl, Konrad, 1985. "On the non-existence of oligopolistic equilibria in differentiated products spaces," Regional Science and Urban Economics, Elsevier, vol. 15(2), pages 229-243, June.
    13. Tyagi, Rajeev K., 2001. "Cost leadership and pricing," Economics Letters, Elsevier, vol. 72(2), pages 189-193, August.
    14. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
    15. Neven, Damien J., 1987. "Endogenous sequential entry in a spatial model," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 419-434.
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    JEL classification:

    • 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

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