Instability in Non-Price Spatial Competition
8 Pages Posted: 14 Dec 2011 Last revised: 23 Dec 2011
Date Written: December 22, 2011
The note analyzes a slightly modified Hotelling model in which two firms, by paying costs, are allowed to choose multiple store locations. We characterize the condition under which agglomeration occurs, and show that the principle of minimum differentiation never holds when the set up cost of additional store is constant or decreasing in the number of each firm's total stores.
Keywords: Hotelling model, multiple locations, spatial competition
JEL Classification: C72, D43, L13
Suggested Citation: Suggested Citation