Modeling the Stackelberg strategy in a linear model (linear city) Hotteling

Musayeva Shaira Azimovna and Usmonova Dilfuza Ilkhomovna

GREEN ECONOMY AND DEVELOPMENT, 2024, vol. 2, issue 4

Abstract: The article examines the model of a linear city with exogenous Stackelberg competition between two firms. Inthis model, at low transport costs, firms in equilibrium are located at one point in the center of the market, while the profit ofthe leader firm is twice the profit of the follower firm, the price is minimal, and the quantity of products supplied is maximalat the point where the firms are located. At higher transport costs, firms differentiate, and the market, as it were, splits intotwo “submarkets”: the leader firm sells the bulk of production near its location, and the follower company sells the bulk ofits products, while the profit of the leader firm exceeds the profit of the follower firm by less than twice, the price is alwaysminimal at the point of location of the leading firm. With an increase in transport costs, the quantities of products suppliedby firms decrease, and the price rises.

Keywords: spatial competition; Stackelberg oligopoly; Hotelling‘s linear city model. (search for similar items in EconPapers)
Date: 2024
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