Hotelling competition with behaviourally-confused vendors

Richard Fairchild () and Graham Mallard ()
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Richard Fairchild: School of Management, University of Bath
Graham Mallard: Visting Scholar, Department of Economics, University of Bath

Economics Bulletin, 2017, vol. 37, issue 3, 1450-1456

Abstract: We consider a Hotelling spatial competition model, in which two vendors simultaneously decide, firstly, on location, and, secondly, on price. We assume quadratic transportation costs, so that the vendors would locate at maximum distance in equilibrium. However, we introduce a counter-acting behavioural/psychological/emotional 'attraction' factor that 'confuses' the vendors and pulls them together. We examine the combined effects of economic price-softening driving the vendors apart, versus behavioural attraction, on the vendors' location decision.

Keywords: Hotelling spatial competition; quadratic transportation costs; economic price-softening; behavioural attraction; location decision. (search for similar items in EconPapers)
JEL-codes: C7 L1 (search for similar items in EconPapers)
Date: 2017-07-02
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