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Spatial Competition with Interacting Agents

16 Pages Posted: 2 Dec 2015 Last revised: 24 Feb 2017

Bertrand Ottino-Loffler

California Institute of Technology - Center for the Mathematics of Information

Forrest Stonedahl

Northwestern University - Northwestern Institute for Complex Systems (NICO)

Vipin P. Veetil

Nihon University

Uri Wilensky

Northwestern University - Northwestern Institute for Complex Systems (NICO)

Date Written: February 23, 2017

Abstract

We generalize Hotelling’s model of spatial competition with more than two firms in a two-dimensional space. Firms choose both price and location to maximize profits. The principle of minimum differentiation does not hold in general. Local duopolies emerge from the interaction between firms. Firms do not spread uniformly across the two-dimensional space, nor do they all charge the same price. Firms in more competitive locations charge lower prices. More product attributes produce more price competition.

Keywords: Hotelling, Spatial Competition, Spatial Distribution, Price, Quality, Dimension, Principle of Minimum Differentiation, Duopoly, Monopolistic Competition, Agglomeration, Product Differentiation, Urban Economy, Distributed Systems

JEL Classification: D21, D43, D83, L13, R12

Suggested Citation

Ottino-Loffler, Bertrand and Stonedahl, Forrest and Veetil, Vipin P. and Wilensky, Uri, Spatial Competition with Interacting Agents (February 23, 2017). GMU Working Paper in Economics No. 15-62. Available at SSRN: https://ssrn.com/abstract=2697263

Bertrand Ottino-Loffler

California Institute of Technology - Center for the Mathematics of Information ( email )

Pasadena, CA 91125
United States

Forrest Stonedahl

Northwestern University - Northwestern Institute for Complex Systems (NICO) ( email )

Chambers Hall
600 Foster Street
Evanston, IL 60208-4057
United States

Vipin Veetil (Contact Author)

Nihon University ( email )

College of Science and Technology
Nihon University
Funabashi, Chiba 274-8501
Japan

HOME PAGE: http://www.vipinveetil.com

Uri Wilensky

Northwestern University - Northwestern Institute for Complex Systems (NICO) ( email )

Chambers Hall
600 Foster Street
Evanston, IL 60208-4057
United States

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