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Hotelling’s competition with relative performance evaluation

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  • Kou, Zonglai
  • Zhou, Min

Abstract

This paper studies the impact of relative performance evaluation (RPE) on the equilibrium locations in a Hotelling model with quadratic transportation cost. It is shown that equilibrium location varies from maximum differentiation to minimum differentiation, depending upon the relative strength of the RPE effect over the competition effect. Moreover, social welfare is greater with than without RPE.

Suggested Citation

  • Kou, Zonglai & Zhou, Min, 2015. "Hotelling’s competition with relative performance evaluation," Economics Letters, Elsevier, vol. 130(C), pages 69-71.
    • Handle: RePEc:eee:ecolet:v:130:y:2015:i:c:p:69-71
    DOI: 10.1016/j.econlet.2015.02.011
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Baumann, Florian & Friehe, Tim, 2021. "Products liability, consumer misperceptions, and the allocation of consumers to firms," Economics Letters, Elsevier, vol. 198(C).
    2. Kimura,Koichiro, 2023. "Does the product characteristic distance get closer or not? Differentiation and imitation in a hotelling model," IDE Discussion Papers 869, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    3. Kimura,Koichiro, 2024. "Imitation Versus Differentiation: Balance Between Product Similarities and Differences in a Hotelling Model," IDE Discussion Papers 917, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Jiancai Pi & Zixin Li, 2024. "Relative performance evaluation and wage inequality," Manchester School, University of Manchester, vol. 92(3), pages 296-312, June.
    5. Wang Xingtang & Li Jie & Wang Leonard F.S., 2019. "Vertical Contract and Competition Intensity in Hotelling’s Model," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(1), pages 1-6, January.
    6. Leonard F. S. Wang & Domenico Buccella, 2020. "Location decision of managerial firms in an unconstrained Hotelling model," Bulletin of Economic Research, Wiley Blackwell, vol. 72(3), pages 318-332, July.

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    More about this item

    Keywords

    Spatial competition; Maximum (minimum) differentiation; Relative performance evaluation;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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