Utility function and location in the Hotelling game

Takanori Ago ()
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Takanori Ago: Senshu University

Letters in Spatial and Resource Sciences, 2023, vol. 16, issue 1, No 21, 9 pages

Abstract: Abstract It is demonstrated herein that a slight expansion of the utility function in the duopolistic Hotelling game enables any symmetric location pair with respect to the center to be in equilibrium, which implies that any level of locational differentiation between the minimum Hotelling (Econ. J.39:41–57, 1929) and maximum D’Aspremont (Econom. 47:1145–1150, 1979) is obtained in one model. The location equilibrium is monotone with respect to the introduced parameter (k), while the equilibrium price and profits are not monotone (they are U-shaped). That is, the nearer the two firms are located, the higher their prices are set (with an upper limit) when k is sufficiently large. This counterintuitive phenomenon is interpreted as an example of strategic complementarity that is inherent in the Hotelling games.

Keywords: Hotelling; Utility function; Location equilibrium; Price term (search for similar items in EconPapers)
JEL-codes: D43 L13 R12 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s12076-023-00344-w

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