### Abstract

Original language | English |
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Place of Publication | Tilburg |

Publisher | Microeconomics |

Number of pages | 21 |

Volume | 718 |

Publication status | Published - 1996 |

### Publication series

Name | FEW Research Memorandum |
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Volume | 718 |

### Fingerprint

### Keywords

- pricing
- location theory
- game theory
- equilibrium theory
- location models

### Cite this

*The Location Model with Reservation Prices*. (FEW Research Memorandum; Vol. 718). Tilburg: Microeconomics.

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*The Location Model with Reservation Prices*. FEW Research Memorandum, vol. 718, vol. 718, Microeconomics, Tilburg.

**The Location Model with Reservation Prices.** / Webers, H.M.

Research output: Book/Report › Report › Professional

TY - BOOK

T1 - The Location Model with Reservation Prices

AU - Webers, H.M.

N1 - Pagination: 21

PY - 1996

Y1 - 1996

N2 - In this paper, we analyze a variant of the standard Hotelling model of spatial competition where firms first choose locations along the line and then, given these locations, compete in prices.Consumers have a finite reservation price and incur a quadratic transportation cost.We show that there exists a unique subgame perfect Nash equilibrium with identical prices for the location-then-price game if the reservation price is sufficiently high.In that case the degree of differentiation is nondecreasing in the reservation price, for differentiation relaxes price competition.If the reservation price is lower, there is a continuum of subgame perfect Nash equilibria due to the fact that firms may act as local monopolists and the other firm's location choice becomes of less importance.All equilibria yield the same profit, however.

AB - In this paper, we analyze a variant of the standard Hotelling model of spatial competition where firms first choose locations along the line and then, given these locations, compete in prices.Consumers have a finite reservation price and incur a quadratic transportation cost.We show that there exists a unique subgame perfect Nash equilibrium with identical prices for the location-then-price game if the reservation price is sufficiently high.In that case the degree of differentiation is nondecreasing in the reservation price, for differentiation relaxes price competition.If the reservation price is lower, there is a continuum of subgame perfect Nash equilibria due to the fact that firms may act as local monopolists and the other firm's location choice becomes of less importance.All equilibria yield the same profit, however.

KW - pricing

KW - location theory

KW - game theory

KW - equilibrium theory

KW - location models

M3 - Report

VL - 718

T3 - FEW Research Memorandum

BT - The Location Model with Reservation Prices

PB - Microeconomics

CY - Tilburg

ER -