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Richard Fairchild and Graham Mallard
''Hotelling competition with behaviourally-confused vendors''
( 2017, Vol. 37 No.3 )
We consider a Hotelling spatial competition model, in which two vendors simultaneously decide, firstly, on location, and, secondly, on price. We assume quadratic transportation costs, so that the vendors would locate at maximum distance in equilibrium. However, we introduce a counter-acting behavioural/psychological/emotional 'attraction' factor that 'confuses' the vendors and pulls them together. We examine the combined effects of economic price-softening driving the vendors apart, versus behavioural attraction, on the vendors' location decision.
Keywords: Hotelling spatial competition, quadratic transportation costs, economic price-softening, behavioural attraction, location decision.
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
Manuscript Received : Feb 14 2017 Manuscript Accepted : Jul 02 2017

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