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A Public Firm Challenged by Entry: Duplication of Diversity?

Tore Nilssen () and Lars Sørgard ()

Working Papers from Norwegian School of Economics and Business Administration-

Abstract: Should a public firm locate close to or far away from a private firm, i.e., is duplication or diversity the optimum policy? We extend the classical Hotelling location game with exogenously fixed prices to the case where consumers' transportation costs are asymmetric, in the sense that it is more costly for a consumer to move in one direction, say to the left (towards 0), than to move to the right (toward 1). First, we consider the case of two private firms. We find a condition for the existence of a pure-strategy equilibrium. We also explore the outcome of a game of sequential entry. Finally, we consider the case of sequential entry when the first mover is a welfare maximiser, in order to account for the presence of a publicly owned incumbent. It is found that both duplication and diversity may be the optimum policy. We discuss the relevance of this analysis for the recent experience in Norway and Denmark with respect to liberalization of TV transmission.

Keywords: LOCATION; OLIGOPOLIES; BROADCASTING (search for similar items in EconPapers)
JEL-codes: L82 L13 R32 L32 (search for similar items in EconPapers)
Pages: 32 pages
Date: 1998
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Journal Article: A public firm challenged by entry: duplication or diversity? (2002) Downloads
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