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Strategic Location Choice and Network Formation for Entry

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  • Keizo Mizuno
  • Yasunori Okumura

Abstract

In our model, an entrant has two effective strategies for profit maximization: collaboration with incumbents and location choice. We analyze the effect of allowing an entrant the opportunity to collaborate with incumbents on its location choice. First, we show that when collaboration requires mutual consent, the entrant has an incentive to choose a noncentral location to collaborate with incumbents and facilitate its entry. Second, the existing collaboration among incumbents does not always deter entry; rather, this effect depends on the magnitude of the collaboration effect.

Suggested Citation

  • Keizo Mizuno & Yasunori Okumura, 2014. "Strategic Location Choice and Network Formation for Entry," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(2), pages 201-224, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201406)170:2_201:slcanf_2.0.tx_2-m
    DOI: 10.1628/093245613X669718
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    References listed on IDEAS

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    Cited by:

    1. Aoki, Reiko & Hillas, John & Kao, Tina, 2014. "Product Customization in the Spokes Model," CEI Working Paper Series 2014-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    2. Luca Correani & Fabio Di Dio & Patrizio Morganti, 2022. "Does the Nature of Goods Affect Bilateral Exchange of Technology and Location Choice in Stable Networks?," Journal of Industry, Competition and Trade, Springer, vol. 22(3), pages 333-347, December.
    3. Fabio Di Dio & Luca Correani, 2019. "Collaboration Networks in a Hotelling Game," Economics Bulletin, AccessEcon, vol. 39(1), pages 127-141.

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    More about this item

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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