This note analyzes a slightly modified
Hotelling model in which two firms are allowed to choose multiple store locations.
Each firm can endogenously choose the number of stores while opening a store
incurs a set-up cost. We show that the principle of minimum differentiation, i.e., both firms open a store each on
the center, never holds when the set-up cost is decreasing in the number
of stores. Under general cost functions that include non-linear and asymmetric
set up costs, we characterize the conditions under which the principle holds.
General payoff functions that are non-linear in the market share are also
Cite this paper
Y. Yasuda, "Instability in the Hotelling’s Non-Price Spatial Competition Model," Theoretical Economics Letters, Vol. 3 No. 3, 2013, pp. 7-10. doi: 10.4236/tel.2013.33A002.
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