Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2014-10-02
Number: 14-131/VII
Author-Name: Pim Heijnen
Author-Workplace-Name: University of Groningen
Author-Name: Adriaan Soetevent
Author-Workplace-Name: University of Groningen
Title: Price Competition on Graphs
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 simple star graphs and conjecture that this non-existence result holds more generally for all graph models with two or more firms that cannot be reduced to a line or circle.
Classification-JEL: D43, L10, R12
Keywords: spatial competition, Hotelling, graphs
File-Url: https://papers.tinbergen.nl/14131.pdf
File-Format: application/pdf
File-Size: 526599 bytes
Handle: RePEc:tin:wpaper:20140131