Expansion of Location Theories of Firmsand Products’ Consistency Using Triangular Distribution Approach

Kiumars Shahbazi and Salah Salimian
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Salah Salimian: Faculty of Economics and Management, Urmia University, Urmia, Iran.

Iranian Economic Review (IER), 2017, vol. 21, issue 3, 497-518

Abstract: Oe of the main criticisms of location models is simplistic assumptions concerning the consumers’ distribution on the street or city. The location models usually make use of uniform distribution of consumers while it is not true in reality,and mostly the consumers’ accumulation is more in the city centers rather than suburb areas.This study deals with selection of optimallocation of firmsusing Lijesen and Reggiani (2013) spoke model and changing the consumers’ distribution from uniform to triangular in a two-step game. In this game, the firmsselect their location, at the first stage, and enter the price competition at the second stage. Results indicate that the increased number of streets and transportation costs leads to price increase and this indicates that the farther away are the firms from each other, their competition in the market would decrease and the price would increase. If both firms are located in the same distance from city center, they would gain the same market share and more inclined toward being closer to city center or having minimum distance. Moreover, when in the consistency issue include the triangular distribution, Nash equilibrium price is less compared with Rohlfs model (1971) and a greater range of consumers purchase the product.

Keywords: Location; Triangular Distribution; Consistency; Nash Equilibrium. (search for similar items in EconPapers)
Date: 2017
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