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Simulation of the Stackelberg–Hotelling Game

Author

Listed:
  • Luis Garcia-Perez

    (Complex Systems Group, Universidad Politécnica de Madrid, C. Universitaria, 28040 Madrid, Spain)

  • Juan Grau-Climent

    (Complex Systems Group, Universidad Politécnica de Madrid, C. Universitaria, 28040 Madrid, Spain)

  • Juan C. Losada

    (Complex Systems Group, Universidad Politécnica de Madrid, C. Universitaria, 28040 Madrid, Spain)

  • Ramon Alonso-Sanz

    (Complex Systems Group, Universidad Politécnica de Madrid, C. Universitaria, 28040 Madrid, Spain)

Abstract

This work studies the Hotelling game with sequential choice of prices, that is, the Stackelberg–Hotelling (SHOT) game. The game is studied through numerical simulation, which provides the subgame perfect equilibrium solution not only in the unrestricted game but also in the game with reservation cost and with elastic demand. The simulation technique is tested first in the unconstrained game, where the analytical subgame perfect equilibrium solution was already known. Then, the numerical procedure is generalized to cope with the SHOT game with reservation cost and with elastic demand. These enriched formulations of the SHOT game have not been studied so far, so this article provides an exploratory study of them.

Suggested Citation

  • Luis Garcia-Perez & Juan Grau-Climent & Juan C. Losada & Ramon Alonso-Sanz, 2024. "Simulation of the Stackelberg–Hotelling Game," Games, MDPI, vol. 15(5), pages 1-25, October.
    • Handle: RePEc:gam:jgames:v:15:y:2024:i:5:p:34-:d:1496659
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    References listed on IDEAS

    as
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    2. Graitson, D., 1980. "On Hotelling's 'stability in competition' again," Economics Letters, Elsevier, vol. 6(1), pages 1-6.
    3. A. P. Lerner & H. W. Singer, 1937. "Some Notes on Duopoly and Spatial Competition," Journal of Political Economy, University of Chicago Press, vol. 45(2), pages 145-145.
    4. Anderson, Simon, 1987. "Spatial competition and price leadership," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 369-398.
    5. Iskakov, Mikhail & Iskakov, Alexey, 2012. "Solution of the Hotelling’s game in secure strategies," Economics Letters, Elsevier, vol. 117(1), pages 115-118.
    6. Tönu Puu, 2002. "Hotelling's "Ice cream dealers" with elastic demand," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 36(1), pages 1-17.
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