The Annals of Regional Science

, Volume 49, Issue 2, pp 447–469 | Cite as

A Hotelling style model of spatial competition for a convenience good

Special Issue Paper
  • 327 Downloads

Abstract

Ordinarily people do not make special purpose trips to acquire goods like gasoline or groceries but instead buy them as the need arises in the course of their daily lives. Such goods are commonly called convenience goods. We modify Hotelling’s model of spatial competition so that we can analyze the price equilibrium of duopolists that retail a convenience good. Certain features of the duopolists’ demand functions suggest that price competition is more severe in the convenience goods model than in the Hotelling model. The same features complicate the analysis because they mean that a pure strategy price equilibrium does not exist for many locational configurations. Although we are not able to find the mixed strategy price equilibrium analytically, we do present some numerical results on equilibrium prices that broadly confirm this suggestion. We also provide a more general product differentiation interpretation of the convenience good model.

JEL Classification

L91 D11 D21 D40 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. d’Aspremont C, Gabszewicz J, Thisse J-F (1979) On Hotelling’s stability in competition. Econometrica 47(5): 1145–1150CrossRefGoogle Scholar
  2. Eaton BC (1972) Spatial competition revisited. Canadian J Econ May 1972, 268–278Google Scholar
  3. Eaton BC, Lipsey RG (1989) Production differentiation. In: Schmalensee R, Willig R (eds) Handbook of industrial organization. North Holland, Elsevier, pp 723–768CrossRefGoogle Scholar
  4. Eaton BC, Wooders M (1985) Sophisticated entry in an address model of monopolistic competition. Rand J Econ Autumn 1985, 277–292Google Scholar
  5. Hotelling H (1929) Stability in competition. Econ J 39: 41–57CrossRefGoogle Scholar
  6. Kaldor N (1935) Market imperfections and excess capacity. Economica 2: 35–50CrossRefGoogle Scholar
  7. Mckelvey RD, McLennan AM, Turocy TL (2007) Gambit: software tools for game theory, version 0.2007.12.04, December 1987Google Scholar
  8. Osborne M, Pitchik C (1987) Equilibrium in Hotelling’s model of spatial competition. Econometrica 55(4): 911–922CrossRefGoogle Scholar
  9. Salop S (1979) Monopolistic competition with outside goods. Bell J Econ 10: 141–156CrossRefGoogle Scholar

Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  1. 1.Department of EconomicsThe University of CalgaryCalgaryCanada

Personalised recommendations