Spatial competition models

Abstract

[en] Hotelling’s spatial competition model defines a two-stage non-cooperative game in duopoly. First, each seller simultaneously chooses a location where to operate on a segment. Then, each firm simultaneously selects the price it wants to charge for its products. In the first part of this study, we present in detail this model — announced in 1929 by Harold Hotelling in his seminal paper Stability of Competition — , we identify its limitations and we introduce a variation using a different transportation cost function proposed by d’Aspremont et al. in 1979. In addition, we analyse an extension of the model to a circular market announced in 1979 and known as Salop’s circle model. The second part of this project is devoted to study the existence of Nash equilibria in games in which firms do not compete on price but only on location. Particularly, we follow Fournier and Scarsini (2019). Finally, we briefly touch upon the problem of inefficiency of Nash equilibria.