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

See all articles by Kieron Meagher

Kieron Meagher

Australian National University (ANU) - School of Economics

Ernie G. S. Teo

NUS Business School

Wen Wang

Oliver Wyman - Financial Services; UNSW Business School

Date Written: April 30, 2008

Abstract

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

Meagher, Kieron and Teo, Ernie G. S. and Wang, Wen, A Duopoly Location Toolkit: Consumer Densities Which Yield Unique Spatial Duopoly Equilibria (April 30, 2008). B.E. Journal of Theoretical Economics, Vol. 8, No. 1. Available at SSRN: https://ssrn.com/abstract=1074704

Kieron Meagher

Australian National University (ANU) - School of Economics ( email )

Coombs Building 9
Canberra, Australian Capital Territory 0200
Australia

Ernie G. S. Teo (Contact Author)

NUS Business School ( email )

15 Kent Ridge Drive
119245
Singapore

Wen Wang

Oliver Wyman - Financial Services ( email )

Darling Park Tower 3
201 Sussex Street
Sdyney, 2000
Australia

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

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