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Are spatial differentiation and product differentiation substitutes?

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  • Gokan,Toshitaka
  • Thisse,Jacques-François

Abstract

We revisit the Hotelling model in the case of firms selling differentiated varieties. When product differentiation outweighs travel costs, the location-then-price game has a unique subgame perfect Nash quilibrium in which the two firms located at the market center.

Suggested Citation

  • Gokan,Toshitaka & Thisse,Jacques-François, 2024. "Are spatial differentiation and product differentiation substitutes?," IDE Discussion Papers 943, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper943
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    File URL: https://ir.ide.go.jp/record/2001133/files/IDP000943_001.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    location|product differentiation|agglomeration;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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