Complete Solution of the Hotelling Problem: Equilibrium in Secure Strategies for the Price Subgame

M. Iskakov and A. Iskakov
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M. Iskakov: Trapeznikov Institute of Control Sciences RAS, Moscow, Russia
A. Iskakov: Trapeznikov Institute of Control Sciences RAS, Moscow, Russia

Journal of the New Economic Association, 2012, vol. 13, issue 1, 10-33

Abstract: We study the classical problem of spatial competition between two players with linear transport costs proposed by (Hotelling, 1929). We employ the concept of the equilibrium in secure strategies (ESS). The reviewed definitions of the ESS and of the best secure response are presented. The set of the secure responses in the Hotelling game is obtained both in the case of elastic and inelastic demand. The complete solution of the two-stage location-price Hotelling game is given for the inelastic demand.

Keywords: hotelling; product differentiation; equilibrium in secure strategies (search for similar items in EconPapers)
JEL-codes: C72 D43 L12 L13 (search for similar items in EconPapers)
Date: 2012
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