Product flexibility and price competition in Hotelling’s duopoly

Article dans une revue: In a Hotelling's duopoly with a general transportation cost function, we study competition through catalog: each firm chooses at the same time a price and a location. With simultaneous catalog offers, there is no equilibrium in pure strategies for high valuations of the consumers, while a Stackelberg equilibrium exists under mild conditions. The follower is better off than the leader, whose price is smaller: the location preemption effect is weaker than the price leadership effect. We obtain closed-form solutions for the linear and quadratic cost cases. Using these results, we discuss the nature of competition depending on the relative flexibility of products and prices.

Auteur(s)

Pierre Fleckinger, Thierry Lafay

Revue
  • Mathematical Social Sciences
Date de publication
  • 2010
Mots-clés JEL
D43 L13 M3
Pages
  • 61-68
Version
  • 1
Volume
  • 60