Non-Uniformities in Spatial Location Models

摘要

In this paper we study the impact of demand dispersals on the equilibrium outcomein a two-dimensional spatial location model with two firms. The corresponding location-then-price game is solved by backwards induction. Standard optimization techniques however are not applicable due to the non quasi-concavity of the profit functions. Candidate equilibria for the 'overall game' (referred to as global equilibria) can be found however by restricting the firms' strategies so as to end up in a specific demand region. From the set of local equilibria it is possible then to determine the (unique) global equilibrium. In equilibrium, firms' locations and prices are such that both firms face equal demands and have equal profits.