Meagher, K.J. and Zauner, K.G. (2004) Product differentiation and location decisions under demand uncertainty. International Journal of Economic Theory, 117 (2). pp. 201-216. ISSN 0022-0531
We investigate Hotelling's duopoly game of location-then-price choices with quadratic transportation costs and uniformly distributed consumers under the assumption that firms are uncertain about the exact location of demand. We characterize the unique equilibrium and the socially optimal locations. Contrary to the individual-level random utility models, location uncertainty is a differentiation force. In equilibrium, increases in the variance of the uncertainty lead to greater differentiation, higher expected equilibrium prices and profits, and a greater welfare loss.
|Institution:||The University of York|
|Academic Units:||The University of York > Economics and Related Studies (York)|
|Depositing User:||York RAE Import|
|Date Deposited:||22 May 2009 10:16|
|Last Modified:||22 May 2009 10:16|
|Publisher:||Elsevier Science B.V.|