Hotelling Meets Weber

Fu-Chuan Lai and So Kubota
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So Kubota: Faculty of Economics, University of Tokyo

No CIRJE-F-793, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: In this paper, spatial competition between two sellers in a market (Hotelling, 1929) and total transportation costs minimization (Weber, 1909) are combined, and equilibrium and optimum locations of firms are analyzed along with the consequent policy implications. We reveal that when the output prices are fixed and equal, then both firms agglomerate at the market center, irrespective of the distribution of inputs. Further, we also show that the middle point of firm locations in Hotelling's model is identical to the Weber's point. Finally, it is indicated that the location of firms in Hotelling's model is far from the socially optimal location.

Pages: 17 pages
Date: 2011-03
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Journal Article: Hotelling meets Weber (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2011cf793

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