- Price competition on graphs
- Tinbergen Institute discussion paper
- TI 2010-126/1
- Number of pages
- Tinbergen Institute
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
This paper extends Hotelling's model of price competition with quadratic transportation costs from a line to graphs. I propose an algorithm to calculate firm-level demand for any given graph, conditional on prices and firm locations. One feature of graph models of price competition is that spatial discontinuities in firm-level demand may occur. I show that the existence result of D'Aspremont et al. (1979) does not extend to simple star graphs. I conjecture that this non-existence result holds more generally for all graph models with two or more firms that cannot be reduced to a line or circle.
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