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The Hotelling Paradox
Umeå University, Faculty of Social Sciences, Centre for Regional Science (CERUM).
2011 (English)In: Oligopoly: Old Ends - New Means / [ed] Tönu Puu, Berlin: Springer Berlin/Heidelberg, 2011, 151-170 p.Chapter in book (Other academic)
Abstract [en]

As mentioned in Chap. 1, the so called Bertand variant of oligopoly, with differentiated goods, is a less yielding format for interesting models than the very clear cut original Cournot case. The main reason is the difficulty of quantifying the difference between close substitutes. There is, however, one exception, and that is the 1929 model by Harold Hotelling. In this frame consumers regard the commodity supplied by different competitors as homogenous, but there is a difference between suppliers due to spatial distance from the consumers and the necessary transportation costs. Each producer has its market area, within which it is a monopolist. As the consumers always buy from the cheapest supplier, in terms of mill price plus transportation cost, there is competition at the market boundaries defined through the condition that supply prices break even. If one local monopolist raises mill price, it will see the market area diminished, and with this total demand for its supply.

Place, publisher, year, edition, pages
Berlin: Springer Berlin/Heidelberg, 2011. 151-170 p.
National Category
Social Sciences Interdisciplinary
URN: urn:nbn:se:umu:diva-74552DOI: 10.1007/978-3-642-15964-0_7ISI: 000285558400007ISBN: 978-3-642-15963-3ISBN: 978-3-642-15964-0OAI: diva2:635062
Available from: 2013-07-02 Created: 2013-07-01 Last updated: 2013-07-02Bibliographically approved

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