Monday, February 28, 2011
Posted by D. Daniel Sokol
Michal Krol (Manchester - Economics) has posted More price competition can benefit spatial duopolists when the consumer preferences are uncertain.
ABSTRACT: This note considers the e¤ect of the demand faced by Hotelling duopolists varying in both location and responsiveness to price changes. The latter may increase on average, but still make the firms better off due to the equilibrium product differentiation increasing sufficiently to relax the intensi ed second-stage price competition. Furthermore, a social planner could always improve welfare via a pro- portional transport tax schedule contingent on the realization of the uncertainty.