Product flexibility and price competition in Hotelling's duopoly

Pierre Fleckinger () and Thierry Lafay ()
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Thierry Lafay: PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne

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Abstract: In a Hotelling's duopoly with a general transportation cost function, we study competition through catalog: each firm chooses at the same time a price and a location. With simultaneous catalog offers, there is no equilibrium in pure strategies for high valuations of the consumers, while a Stackelberg equilibrium exists under mild conditions. The follower is better off than the leader, whose price is smaller: the location preemption effect is weaker than the price leadership effect. We obtain closed-form solutions for the linear and quadratic cost cases. Using these results, we discuss the nature of competition depending on the relative flexibility of products and prices.

Date: 2010-07
Note: View the original document on HAL open archive server: https://hal.science/hal-00641873v1
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Published in Mathematical Social Sciences, 2010, 60 (1), pp.61-68

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Related works:
Journal Article: Product flexibility and price competition in Hotelling's duopoly (2010)
Working Paper: Product flexibility and price competition in Hotelling's duopoly (2010)
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