Product differentiation and entry timing in a continuous time spatial competition model

Takeshi Ebina, Noriaki Matsushima and Daisuke Shimizu

European Journal of Operational Research, 2015, vol. 247, issue 3, 904-913

Abstract: We extend the well-known spatial competition model (d’Aspremont, Gabszewicz & Thisse, 1979) to a continuous time model in which two firms compete in each instance. Our focus is on the entry timing decisions of firms and their optimal locations. We demonstrate that the leader has an incentive to locate closer to the center to delay the follower’s entry, leading to a non-maximum differentiation outcome. We also investigate how exogenous parameters affect the leader’s location and firms’ values and, in particular, numerically show that the profit of the leader changes non-monotonically with an increase in the transport cost parameter.

Keywords: Location; Economics; Hoteling model; Continuous time; Entry timing (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (13)

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Working Paper: Product differentiation and entry timing in a continuous time spatial competition model (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:247:y:2015:i:3:p:904-913

DOI: 10.1016/j.ejor.2015.06.049

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