Theoretical Economics Letters

Volume 3, Issue 3 (June 2013)

ISSN Print: 2162-2078   ISSN Online: 2162-2086

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Instability in the Hotelling’s Non-Price Spatial Competition Model

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DOI: 10.4236/tel.2013.33A002    5,046 Downloads   10,516 Views  Citations
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ABSTRACT

This note analyzes a slightly modified Hotelling model in which two firms are allowed to choose multiple store locations. Each firm can endogenously choose the number of stores while opening a store incurs a set-up cost. We show that the principle of minimum differentiation, i.e., both firms open a store each on the center, never holds when the set-up cost is decreasing in the number of stores. Under general cost functions that include non-linear and asymmetric set up costs, we characterize the conditions under which the principle holds. General payoff functions that are non-linear in the market share are also considered.

Share and Cite:

Y. Yasuda, "Instability in the Hotelling’s Non-Price Spatial Competition Model," Theoretical Economics Letters, Vol. 3 No. 3A, 2013, pp. 7-10. doi: 10.4236/tel.2013.33A002.

Cited by

[1] Agent-Based Modeling and Simulation for Two-Dimensional Spatial Competition
Agents and Multi-Agent Systems: Technologies and Applications 2018, 2018
[2] Asymmetries in Competitive Location Models on the Line
Spatial Interaction Models, 2017

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