A Unified Treatment of the Segment and the Circular Market Models
Following the seminal work of Hotelling (1929), many researchers have studied firms’ strategic choices over price and/or location within spatial markets. These studies on spatial competition are not mere extensions of non-spatial theories but add a new aspect of their own: the introduction of space relaxes price competition between firms because firms scattered over the geographical space acquire some degree of monopoly power. Thus price competition does not necessarily yield a Bertrand outcome (marginal cost pricing).
KeywordsNash Equilibrium Circle Model Switching Cost Pure Strategy Segment Model
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