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Who benefits from market expansion?
Author(s) -
Li Tieshan
Publication year - 2013
Publication title -
canadian journal of administrative sciences / revue canadienne des sciences de l'administration
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 48
eISSN - 1936-4490
pISSN - 0825-0383
DOI - 10.1002/cjas.1264
Subject(s) - microeconomics , unit (ring theory) , game theory , economics , business , industrial organization , mathematics , mathematics education
This article presents a study of the effects of both symmetric and asymmetric market expansion on two retailers and their consumers. Envisioning two retailers along a Hotelling line, this article describes both the symmetric and asymmetric expansion of the market; the most interesting results occur when expansion is asymmetric. Applying game theory and showing the results numerically, I find three categories of unit‐distance moving costs incurred in three scenarios: when both retailers choose to move, when only one retailer chooses to move, and when neither retailer chooses to move. With fixed moving costs, moving is the dominant strategy for the retailer close to market expansion. Surprisingly, the retailer located the farthest away from the expansion has the highest profits. Copyright © 2013 ASAC. Published by John Wiley & Sons, Ltd.