Hotelling Was Right

7 Pages Posted: 15 Nov 2013

Date Written: Winter 2013

Abstract

This paper proves existence of a subgame perfect equilibrium in Hotelling's original (unidimensional city, linear transportation costs, uniform distribution of the consumers, two firms with identical and constant marginal cost, perfectly inelastic demand) location–price game such that in the location subgame the location choices of the firms are pure and identical. The result can be extended to variations of the original setup (multidimensional city, nonlinear transportation costs, nonuniform distribution of consumers, many firms with identical and constant marginal costs, two or more firms with nonidentical but constant marginal costs).

Suggested Citation

Xefteris, Dimitrios, Hotelling Was Right (Winter 2013). Journal of Economics & Management Strategy, Vol. 22, Issue 4, pp. 706-712, 2013. Available at SSRN: https://ssrn.com/abstract=2354745 or http://dx.doi.org/10.1111/jems.12032

Dimitrios Xefteris (Contact Author)

University of Cyprus ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus

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