Price competition on graphs

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Abstract

This paper extends Hotelling's model of price competition with quadratic transportation costs from a line to graphs. We derive an algorithm to calculate firm-level demand for any given graph, conditional on prices and firm locations. These graph models of price competition may lead to spatial discontinuities in firm-level demand. We show that the existence result of d’Aspremont et al. (1979) does not extend to graphs that cannot be reduced to a line or circle.
Original languageEnglish
Pages (from-to)161-179
Number of pages20
JournalJournal of Economic Behavior & Organization
Volume146
DOIs
Publication statusPublished - Feb-2018

Keywords

  • Spatial competition
  • Hotelling
  • Graphs
  • DISCONTINUOUS ECONOMIC GAMES
  • LOSCHIAN LOCATION MODEL
  • RETAIL GASOLINE MARKET
  • MONOPOLISTIC COMPETITION
  • EDGEWORTH CYCLES
  • EQUILIBRIUM
  • EXISTENCE
  • DIFFERENTIATION
  • STABILITY
  • OLIGOPOLY

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