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Optimal Localization of Firms in Hotelling Networks

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Modeling, Dynamics, Optimization and Bioeconomics I

Part of the book series: Springer Proceedings in Mathematics & Statistics ((PROMS,volume 73))

Abstract

This paper develops a theoretical framework to study price competition in a Hotelling-type network game, extending the Hotelling’s model of price competition with linear transportation costs from a line to a network. Under explicit conditions on the production costs and road lengths, we exhibit the existence of a pure Nash equilibrium strategy. We study the effect of small perturbations on the localizations of firms and we conclude that, for networks with all degrees above two, the node localization is optimal.

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References

  1. Hotelling, H.: Stability in competition. Econ. J. 39, 41–57 (1929)

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  2. Pinto, A.A., Parreira, T.: A hotelling-type network. In: Peixoto, M., Pinto, A.A., Rand, D. (eds.) Dynamics, Games and Science. I. Springer Proceedings in Mathematics, vol. 1, pp. 709–720. Springer, Berlin (2011)

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  3. Parreira, T., Pinto, A.A.: Local market structure in a hotelling town. Submited Paper, 2013

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  4. Salop, S.: Monopolistic competition with outside goods. Bell J. Econ. 10, 141–156 (1979)

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Acknowledgements

We acknowledge the financial support of LIAAD-INESC TEC through ‘Strategic Project—LA 14—2013–2014’ with reference PEst-C/EEI/LA0014/2013, USP-UP project, IJUP, Faculty of Sciences, University of Porto, Calouste Gulbenkian Foundation, FEDER, POCI 2010 and COMPETE Programmes and Fundao para a Cincia e a Tecnologia (FCT) through Project “Dynamics and Applications”, with reference PTDC/MAT/121107/2010.

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Authors and Affiliations

  1. LIAAD-INESC TEC, Porto, Portugal

    Alberto Adrego Pinto & Telmo Parreira

  2. Department of Mathematics, Faculty of Sciences, University of Porto, Rua do Campo Alegre, 687, 4169-007, Porto, Portugal

    Alberto Adrego Pinto

  3. Department of Mathematics, University of Minho, Campus de Gualtar, 4710-057, Braga, Portugal

    Telmo Parreira

Authors
  1. Alberto Adrego Pinto
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  2. Telmo Parreira
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Corresponding author

Correspondence to Telmo Parreira .

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Editors and Affiliations

  1. University of Porto, Department of Mathematics, Porto, Portugal

    Alberto Adrego Pinto

  2. Univ. of California, Dept. of Agricultural and Resource Economics, Berkeley, California, USA

    David Zilberman

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Pinto, A.A., Parreira, T. (2014). Optimal Localization of Firms in Hotelling Networks. In: Pinto, A., Zilberman, D. (eds) Modeling, Dynamics, Optimization and Bioeconomics I. Springer Proceedings in Mathematics & Statistics, vol 73. Springer, Cham. https://doi.org/10.1007/978-3-319-04849-9_2

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