linear city model of product differentiation

Social welfare. • Bertrand Model of Price Competition • Cournot Model of Quantity Competition • Product Differentiation • Dynamic Competition • Capacity Constraints • Endogenous Entry • Repeated Interaction Advanced Microeconomic Theory 2 . Using a Hotelling-type product differentiation model (linear city model), we inves-tigate the location strategies of upstream and downstream firms. Email: anaespinola@wsu.edu HUAN ZHAO School of Economic Sciences, Washington State University, USA. The main result of this study shows that … If agt1, it is a 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 … This paper investigates a spatial competition model of product differentiation. Using this new inverse demand function, our paper shows that the equilibrium outcome under the circular city model depends on the shape of this function, namely the sign of E. However, we also show that the result in the linear model is not affected by the introduction of product … We study product repositioning between firms with predetermined base positions for their products in existing markets. Industrial Organization. Not only are business locations minimally differentiated, but so too are products and politicians. yxop 1. Product proliferation. In two‐party elections, ‘each … And then, consumer location represents individual preferences for each consumer. There are two firms which sell a kind of goods. A unit mass of con-sumers are uniformly distributed on … Given this, adding product differentiation as above is a convincing extension to the location-quantity literature. Email: liyouping@ecust.edu.cn . Next week, vertical product differentiation Models in which all … • Each firm competes with all other firms in this model. 17(4), pages 461-477, August. 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. On Transportation Cost and Product Differentiation in Hotelling’s Model . We find that neither base products nor new products in attractive positions in the … Tel: 509 335 8494. Our efficiency comparisons suggest that under a setting of horizontal product differentiation a tax/subsidy (either on consumers or polluting ?firms) … A location (spatial) model refers to any monopolistic competition model in economics that demonstrates consumer preference for particular brands of goods and their locations. 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 … 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. Keywords: agglomeration, linear city, location, principle of minimum differentiation ... Hotelling’s linear city model. Vertical product differentiation Models in which all consumers prefer the … Transportation cost … Imagine a town with a Main Street of length 1. 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. Let be the set of the firms in this model. In the mill pricing (shopping) location-price models, both linear-city and circular-city models yield maximal differentiation. We find that neither tax affects equilibrium location patterns as long as each firm has the same production cost. 300 … Fax: 509 335 1173. Choice of products: rms choose how to di erentiate from rivals, this impacts the type of products that they choose to o er and the diversity of products that consumers face. School of Business, East China University of Science and Technology, Shanghai, China . Price discrimination in the Hotelling set-up. Firm location can be interpreted as the product specification. Soft drinks Sugar … Linear Hotelling model Linear Hotelling model 1 Town with just one street of length 1, along which all reside. This paper applies an unconstrained Hotelling linear city model to study the effects of managerial delegation on the firms’ location/product differentiation level in a duopoly industry. 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 . 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. 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. 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. 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 … We briefly … 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 . ABSTRACT . • City lengths and consumer densities need not be identical. The Salop (1979) circular-city model. EC 105. The Dixit-Stiglitz (1977) model of exogenous differentiation. Firstly, the problem of the consumers is addressed under the linear city. Email: huanzhao@wsu.edu Submitted October 9, 2011; … location choice in a model of product differentiation, which includes Hotelling (linear-city) and Vickrey-Salop (circular-city) spatial models as special cases. Two taxes can yield different location … (essentially the same model as (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. We develop a three stage complete information game, using the Hotelling?s linear city model. population, i.e. Received October 8, 2011; revised November 15, 2011; accepted November 24, 2011. 1 Spatial Competition 1.1 The linear city (Hotelling, 1929) • Linear … Each of these … 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. • The analysis provides a spatial microfoundation for a linear differentiated Bertrand oligopoly. The classic example is ice‐cream vendors locating near one another on a beach. Social welfare. Examples of location models include Hotelling’s Location Model, Salop’s Circle Model, and hybrid variations. Horizontal product differentiation Models in which different consumers prefer different products. Consumers located on the street with uniform density, ie., there are 0.25 \consumers" living between 0 and 0:25. 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. City, what we called city, can be interpreted as the preference space of consumers. 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. In this paper, we analyze a spatial Bertrand oligopoly … Given a constant marginal cost c, the profit of firm j is Π=−jjj() ( ) ()p pcqp, j =1, 2 . 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. In traditional economic models, consumers display preference given the constraints of a … 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. 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. 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 … The first model of product differentiation is due to Hotelling (1929). Product proliferation. Firm 1’s goods are valued s 1 to the consumers, and firm 2’s goods have intrinsic value of s 2. Keywords: location-price model, mill pricing, location … 98 Application. ( Matt Shum HSS, California Institute of Technology)Lecture 8: Product Di erentiation 5 / 22. The triangular distribution aims to represent a case of … Two pizza places located at … 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 model transportation cost in Hotelling’s model as a general exponential function and analyze firms’ … linear and circular product spaces. There is a linear city of length one, the [0,1] interval. 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 … Consumers are assumed to be distributed uniformly along the linear city and prices are constant and equal between the two shops. Traditional vs. location models. It was developed as a (spatial) model of location choice by Hotelling (1929) and has been co-opted by several distinct areas in economics. Price discrimination in the Hotelling set-up. 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. The Salop (1979) circular-city model. Hotelling’s Law explains why retailers and restaurants so often locate near one another. The demand for product j is a function of the two firms’ prices. I will not give you more practice problems later on. We also show that more inefficient trans-port technologies of upstream firms may enhance welfare. Hotelling’s product di ﬀerentiation: an inﬁnite-dimensional linear programming approach Rodrigo Peñaloza∗ Department of … The Dixit-Stiglitz (1977) model of exogenous differentiation. The basic result is that the two shops’ profits are identical at a Nash equilibrium because the best strategy … • The model has a unique and easily computable Nash equilibrium. Two taxes can yield different location patterns under cost heterogeneity among firms. The Hotelling (1929) linear-city model with location choice. Consider Hotelling's model (a street of length one, consumers … The Hotelling (1929) linear-city model with location choice. We find that neither tax affects equilibrium location patterns as long as each firm has the same production cost. If a0, this model is a circular-city model. Example: New BMWs vs used Toyota Corollas o Products and Characteristics Products are bundles of characteristics Consumers have preferences for different characteristics. A consumer … 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 … 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. Horizontal product differentiation Models in which different consumers prefer different products. Abstract. 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. Youping Li . Otherwise, the first firm is still a monopolization in this linear city. "Environmental policy in a linear city model of product differentiation," Environment and Development Economics, Cambridge University Press, vol. We show that when transport costs of upstream firms are large, higher transport costs decrease the level of product differentiation of downstream firms. • 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. Equilibrium location patterns as long as each firm has the same production cost product specification two places. Retailers and restaurants so often locate near one another on a beach linear city model of product differentiation sell a kind goods! 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