On competition in a Stackelberg location-design model with deterministic supplier choice

Eligius M. T. Hendrix ()
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Eligius M. T. Hendrix: Universidad de Málaga

Annals of Operations Research, 2016, vol. 246, issue 1, No 3, 19-30

Abstract: Abstract We study a market situation where two firms maximize market capture by deciding on the location in the plane and investing in a competing quality against investment cost. Clients choose one of the suppliers; i.e. deterministic supplier choice. To study this situation, a game theoretic model is formulated. We show that for the modelled situation no Nash equilibrium exists. However, a so-called Stackelberg equilibrium, where one of the firms (the leader) is aware of what the other (follower) is going to do, exists. The questions under study is whether co-location is a natural phenomenon in this case and in which situation one of the firms is not entering the market. The study requires a multi-level thinking where the decisions on location follow from the known quality investment behavior and the actions of the leader take the decisions of the follower into account.

Keywords: Game theory; Competitive location; Bi-level; Stackelberg (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10479-015-1793-9

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