linear city model of product differentiation

THE MODEL OF THE LINEAR CITY UNDER TRIANGULAR DISTRIBUTION OF CONSUMERS Gianpiero TORRISI Newcastle University, Centre for Urban and Regional Development Studies, NE1 7RU, Newcastle, United Kingdom Gianpiero.torrisi@ncl.ac.ukt Abstract This paper presents a model of oligopolistic competition in presence of horizontal differentiation of goods, under a triangular distribution of … 300 … Linear City Competition with Heterogeneous Product Values* Ick-Hyun Nam** We study a model in which a linear city of length 1 exists along the abscissa of a line (0 ≤ x ≤ 1), and consumers are uniformly distributed with density 1 along this interval. Product differentiation Key ideas: modeling characteristic space as a location choice, principle of maximum separation, free entry, representative agent model In section 8.2 we consider a pricing game between two firms producing products that are substitutes. linear and circular product spaces. We model transportation cost in Hotelling’s model as a general exponential function and analyze firms’ … Example: New BMWs vs used Toyota Corollas o Products and Characteristics Products are bundles of characteristics Consumers have preferences for different characteristics. Abstract. The Hotelling (1929) linear-city model with location choice. Topic: Hotelling’s model and product differentiation VERY IMPORTANT : do not look at the answers until you have made a VERY serious effort to solve the problem. 98 Application. Entry: is there enough room for di erentiation so that a rm could enter pro tably Advertising: advertising is a powerful marketing strategy to cre-ate di erentiation in the consumers’ perception about products Bernard Caillaud Product di … Not only are business locations minimally differentiated, but so too are products and politicians. A unit mass of con-sumers are uniformly distributed on … The classic example is ice‐cream vendors locating near one another on a beach. The basic result is that the two shops’ profits are identical at a Nash equilibrium because the best strategy … Email: anaespinola@wsu.edu HUAN ZHAO School of Economic Sciences, Washington State University, USA. If agt1, it is a linear-city model. City, what we called city, can be interpreted as the preference space of consumers. We investigate how unit (or specific) tax and ad valorem tax affect equilibrium location choice in a model of product differentiation, which includes Hotelling (linear-city) and Vickrey-Salop (circular-city) spatial models as special cases. Each of these … Hotelling’s product di ﬀerentiation: an inﬁnite-dimensional linear programming approach Rodrigo Peñaloza∗ Department of … Two taxes can yield different location patterns under cost heterogeneity among firms. If a0, this model is a circular-city model. Linear Hotelling model Linear Hotelling model 1 Town with just one street of length 1, along which all reside. The Salop model (circular city, equilibrium with free entry) 3 Model of vertical di erentiation Marc Bourreau (TPT) Lecture 04: Product di erentiation 2 / 43. Developed by Steven C. Salop in his article “Monopolistic Competition with Outside Goods”, 1979, this locational model is similar to its predecessor´s, but introduces two main differences: firms are located in a circle instead of a line and … firm and the group with product differentiation and selling costs, excess capacity under monopolistic and imperfect competition, criticism of monopolistic competition; Oligopoly in a game theoretic approach - Cournot-Nash equilibrium; Bertrand model; Product differentiation- Linear City Model; Dynamic game: Backward induction, Subgame perfect equilibrium; Repeated Interaction: Finitely and infinitely repeated … Horizontal product differentiation Models in which different consumers prefer different products. Introduction • Monopoly: a single firm • Oligopoly: a limited number of firms – When allowing for firms, the equilibrium predictions embody the results in perfectly competitive and … 1 Spatial Competition 1.1 The linear city (Hotelling, 1929) • Linear … Hotelling’s product differentiation: an infinite-dimensional linear programming approach Rodrigo Peñaloza Economics Department, University of Brasília Economics and Politics Working Paper 72/2017 July 19th, 2017 Economics and Politics Research Group Working Paper Series . Despite the simplicity of this model, it is one of the first to study the trade-off between flexibility and commitment under competition à la Bertrand. We find that neither base products nor new products in attractive positions in the … We also show that more inefficient trans-port technologies of upstream firms may enhance welfare. Next week, vertical product differentiation Models in which all … Soft drinks Sugar … yxop 1. Based on Hotelling’s linear city model, we attempt to generalize models in past studies by encompassing asymmetric base positions and asymmetric cost-efficiency in repositioning. Firstly, the problem of the consumers is addressed under the linear city. There are two firms which sell a kind of goods. • City lengths and consumer densities need not be identical. Price discrimination in the Hotelling set-up. Price discrimination in the Hotelling set-up. We study product repositioning between firms with predetermined base positions for their products in existing markets. Let be the set of the firms in this model. The linear model that we just examined, can be easily interpreted as a product differentiation model rather than, a model of location, a spatial model. The first model of product differentiation is due to Hotelling (1929). • Each firm competes with all other firms in this model. location choice in a model of product differentiation, which includes Hotelling (linear-city) and Vickrey-Salop (circular-city) spatial models as special cases. Product proliferation. ABSTRACT . Examples of location models include Hotelling’s Location Model, Salop’s Circle Model, and hybrid variations. The demand for product j is a function of the two firms’ prices. • Bertrand Model of Price Competition • Cournot Model of Quantity Competition • Product Differentiation • Dynamic Competition • Capacity Constraints • Endogenous Entry • Repeated Interaction Advanced Microeconomic Theory 2 . It was developed as a (spatial) model of location choice by Hotelling (1929) and has been co-opted by several distinct areas in economics. Consumers are assumed to be distributed uniformly along the linear city and prices are constant and equal between the two shops. I will not give you more practice problems later on. Introduction Introduction Michael Porter (Competitive advantage, 1986) Competitive advantage stems from the many discrete ac-tivities a ﬁrm performs in designing, producing, market-ing, delivering and supporting its product. We could model the demand for a product via the demand for its individual characteristics Car demand Height, weight, horse power, fuel economy, number of doors explain much of the demand-side variation in price. The Salop (1979) circular-city model. Email: liyouping@ecust.edu.cn . Product proliferation. Traditional vs. location models. In this paper, we analyze a spatial Bertrand oligopoly … Firm location can be interpreted as the product specification. The Dixit-Stiglitz (1977) model of exogenous differentiation. There are N consumers living on this street and they are uniformly distributed along the street, that is, on a segment of the street of length x there are xN consumers (thus, if N = 900 and we take a segment of length 1/3 then on this segment lives 1/3 of the Page 1 of 3 . The Dixit-Stiglitz (1977) model of exogenous differentiation. Product differentiation; Linear city model; Circular city model; Shaked-Sutton model ; Salop’s circular city model is a variant of the Hotelling’s linear city model. We develop a three stage complete information game, using the Hotelling?s linear city model. It is shown that managerial delegation strongly affects firms’ location/product differentiation choice, both in the simultaneous and sequential moves in one of the three‐stage location‐incentive‐pricing game … • The analysis provides a spatial microfoundation for a linear differentiated Bertrand oligopoly. Keywords: agglomeration, linear city, location, principle of minimum differentiation ... Hotelling’s linear city model. Tel: 509 335 8494. At the final stage, if the second firm enters this market, the corresponding market is the duopoly with horizontal product differentiation in the linear city. PRODUCT DIFFERENTIATION AND OPTION GAMES: ... Hotelling’s linear city model is adapted, to include the tradeoff between preempting competitors under uncertainty or waiting to know where the city’s customers are. population, i.e. (essentially the same model as (1)). • The model has a unique and easily computable Nash equilibrium. The model of the linear city under a triangular distribution of consumers: an empirical analysis on price and location of beverage kiosks in Catania Gianpiero Torrisi This version January, 2009 Abstract - This paper presents a model of oligopolistic competition under horizontal differentiation of products and a triangular distribution of consumers. Environmental policy in a linear city model of product differentiation ANA ESP´INOLA-ARREDONDO School of Economic Sciences, Washington State University, 111C Hulbert Hall Pullman, WA 99164, USA. Transportation cost … We show that when transport costs of upstream firms are large, higher transport costs decrease the level of product differentiation of downstream firms. Youping Li . Email: huanzhao@wsu.edu Submitted October 9, 2011; … There is a linear city of length one, the [0,1] interval. This paper investigates a spatial competition model of product differentiation. Vertical product differentiation Models in which all consumers prefer the … We find that neither tax affects equilibrium location patterns as long as each firm has the same production cost. The Hotelling (1929) linear-city model with location choice. Horizontal product differentiation Models in which different consumers prefer different products. EspÃnola-Arredondo, Ana & Zhao, Huan, 2012. Social welfare. We analyze a Hotelling's linear city model where final products by two firms are symmetric in all dimensions except for the externality their production process generates. product differentiation based on a location model in which a linear city of length 1 is assumed and a duopoly game is played by two shops located along the linear city. Otherwise, the first firm is still a monopolization in this linear city. We briefly … If you turn to the answers to get clues or help, you are wasting a chance to test how well you are prepared for the exams. EC 105. Two pizza places located at … We find that neither tax affects equilibrium location patterns as long as each firm has the same production cost. A consumer … The triangular distribution aims to represent a case of … Fax: 509 335 1173. Keywords: location-price model, mill pricing, location … 17(4), pages 461-477, August. Given a constant marginal cost c, the profit of firm j is Π=−jjj() ( ) ()p pcqp, j =1, 2 . Our efficiency comparisons suggest that, under a setting of horizontal product differentiation, an environmental regulation (either on polluting firms or consumers buying their products) yields higher social welfare than the absence of … We show that when products are identical in all respects except in their environmental properties, a tax/subsidy policy performs better than the case without policy. • Spatial-differentiation model – Linear city (Hotelling, 1929) – Circular city (Salop, 1979) • Vertical differentiation model – Gabszwicz and Thisse (1979, 1980); – Shaked and Sutton (1982, 1983) • Monopolistic competition (Chamberlin, 1933) • Advertising and Informational product differentiation (Grossman and Shapiro, 1984) 1. We … The Linear City Model: This is the basic model of horizontal product diﬀerentiation where the prod-ucts are separated on one (horizontal) dimension or attribute. ( Matt Shum HSS, California Institute of Technology)Lecture 8: Product Di erentiation 5 / 22. 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