Spatial competition with quadratic transport costs and one online firm

Wen-Chung Guo and Fu-Chuan Lai

The Annals of Regional Science, 2014, vol. 52, issue 1, 309-324

Abstract: d’Aspremont (Econometrica 47:1145–1150 , 1979 ) showed that a Hotelling (Econ J 39:41–57 , 1929 ) duopoly model with quadratic transport costs yields maximal differentiation. However, the introducing of an online firm ensures that the duopolist will never be located at the end points of the market. In other words, an online firm can raise a market effect that induces two firms to be finitely differentiated. The implication of the socially optimal solution is derived. The results herein can be extended to allow multiple firms. Finally, a free-entry equilibrium and the Stackelberg equilibrium are also discussed. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: R32; L13; C62 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s00168-013-0586-9

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