Price Competition on Graphs

Tinbergen Institute Discussion Paper 10-126/1

47 Pages Posted: 17 Dec 2010

Multiple version iconThere are 2 versions of this paper

Date Written: December 14, 2010

Abstract

This paper extends Hotelling's model of price competition with quadratic transportation costs from a line to graphs. I propose an algorithm to calculate firm-level demand for any given graph, conditional on prices and firm locations. One feature of graph models of price competition is that spatial discontinuities in firm-level demand may occur. I show that the existence result of D'Aspremont et al. (1979) does not extend to simple star graphs. I 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.

Keywords: spatial competition, Hotelling, graphs

JEL Classification: D43, L10, R12

Suggested Citation

Soetevent, Adriaan R., Price Competition on Graphs (December 14, 2010). Tinbergen Institute Discussion Paper 10-126/1, Available at SSRN: https://ssrn.com/abstract=1725158 or http://dx.doi.org/10.2139/ssrn.1725158

Adriaan R. Soetevent (Contact Author)

University of Groningen ( email )

P.O. Box 800
9700 AV Groningen
Netherlands
++ 31 50 363 7018 (Phone)

HOME PAGE: http://www.soetevent.com

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