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Sung-chi Lin, Hsiao-chi Chen and Shi-miin Liu
''Does Asymmetry or Incomplete Information on Firms' Costs Yield Spatial Agglomeration?''
( 2016, Vol. 36 No.4 )
This paper extends Hotelling's (1929) spatial game by allowing firms to have asymmetric costs or incomplete information about their rivals' costs. In both cases, there exist equilibria under specific conditions. At the equilibria, the cost-efficient firm will locate at the center of the market and earn positive profit, but the less efficient firm may or may not locate at the market center and produces zero output. Thus, our results do not support the findings of Hotelling (1929) and d'Aspremont et al. (1979).
Keywords: Asymmetric costs, incomplete information, location, price competition, spatial game
R3 - Production Analysis and Firm Location: General
Manuscript Received : Jul 06 2016 Manuscript Accepted : Nov 09 2016

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