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Maximal Differentiation in the Hotelling Model with Uncertainty

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Modeling, Dynamics, Optimization and Bioeconomics I

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

Abstract

For the quadratic Hotelling model, we study the optimal localization and price strategies under incomplete information on the production costs of the firms. We compute explicitly the pure Nash-Bayesian price duopoly equilibrium and we prove that it does not depend upon the distributions of the production costs of the firms, except on their first moments. We find when the maximal differentiation is a local optimum for the localization strategy of both firms.

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Acknowledgements

We are thankful to the anonymous referees for their suggestions. 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 Fundação para a Ciência e a Tecnologia (FCT) through Project “Dynamics and Applications”, with reference PTDC/MAT/121107/2010. Telmo Parreira thanks FCT, for the PhD scholarship SFRH/BD/33762/2009.

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Authors and Affiliations

  1. LIAAD-INESC TEC, Porto, Portugal

    Alberto Adrego Pinto & Telmo Parreira

  2. Faculty of Sciences, Department of Mathematics, 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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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). Maximal Differentiation in the Hotelling Model with Uncertainty. 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_34

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