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A Hotelling style model of spatial competition for a convenience good

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  • B. Eaton
  • Jesse Tweedle

Abstract

Ordinarily people do not make special purpose trips to acquire goods like gasoline or groceries but instead buy them as the need arises in the course of their daily lives. Such goods are commonly called convenience goods. We modify Hotelling’s model of spatial competition so that we can analyze the price equilibrium of duopolists that retail a convenience good. Certain features of the duopolists’ demand functions suggest that price competition is more severe in the convenience goods model than in the Hotelling model. The same features complicate the analysis because they mean that a pure strategy price equilibrium does not exist for many locational configurations. Although we are not able to find the mixed strategy price equilibrium analytically, we do present some numerical results on equilibrium prices that broadly confirm this suggestion. We also provide a more general product differentiation interpretation of the convenience good model. Copyright Springer-Verlag 2012

Suggested Citation

  • B. Eaton & Jesse Tweedle, 2012. "A Hotelling style model of spatial competition for a convenience good," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(2), pages 447-469, October.
    • Handle: RePEc:spr:anresc:v:49:y:2012:i:2:p:447-469
    DOI: 10.1007/s00168-011-0458-0
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    References listed on IDEAS

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    1. B. Curtis Eaton, 1972. "Spatial Competition Revisited," Canadian Journal of Economics, Canadian Economics Association, vol. 5(2), pages 268-278, May.
    2. Osborne, Martin J & Pitchik, Carolyn, 1987. "Equilibrium in Hotelling's Model of Spatial Competition," Econometrica, Econometric Society, vol. 55(4), pages 911-922, July.
    3. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    4. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    5. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    6. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
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    Cited by:

    1. Kuninori Nakagawa, 2023. "Horizontal product differentiation in Varian’s model of sales," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(2), pages 607-627, June.
    2. Wieland, Thomas, 2014. "Räumliches Einkaufsverhalten und Standortpolitik im Einzelhandel unter Berücksichtigung von Agglomerationseffekten: Theoretische Erklärungsansätze, modellanalytische Zugänge und eine empirisch-ökonome," MPRA Paper 77163, University Library of Munich, Germany.
    3. Pramono, Ari & Oppewal, Harmen, 2021. "Where to refuel: Modeling on-the-way choice of convenience outlet," Journal of Retailing and Consumer Services, Elsevier, vol. 61(C).
    4. Michael, Bryane & Hartwell, Christopher A. & Korovkin, Vladimir, 2015. "CP ALL and the Case of Value Web Creation," EconStor Preprints 109020, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    Keywords

    L91; D11; D21; D40;
    All these keywords.

    JEL classification:

    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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