A Duopoly Location Toolkit: Consumer Densities Which Yield Unique Spatial Duopoly Equilibria
B.E. Journal of Theoretical Economics, Vol. 8, No. 1
23 Pages Posted: 17 Dec 2007 Last revised: 3 Oct 2008
Date Written: April 30, 2008
Anderson, Goeree and Ramer (1997) observe that although the Uniform consumer density is almost universally assumed in Hotelling style location games, it is more realistic to assume non-uniform distributions. Using Anderson et al.'s (1997) sufficient conditions for the existence of a unique pure strategy equilibrium, we extend the list of known distributions with characterised equilibria from two (Uniform and Triangular) to seven. Our extension includes the Normal and Logistic distributions which are commonly used in empirical research. We also analyse the effects of density choice on equilibrium outcomes. Holding the mean and dispersion of consumer tastes constant, we find that the Uniform distribution inflates differentiation effects.
Keywords: Hotelling, Log-Concave, Location Duopoly, Spatial Compettion, Distribution
JEL Classification: D43, L13, R32
Suggested Citation: Suggested Citation