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Location decision of managerial firms in an unconstrained Hotelling model
Author(s) -
Wang Leonard F. S.,
Buccella Domenico
Publication year - 2020
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/boer.12224
Subject(s) - duopoly , delegation , product differentiation , microeconomics , incentive , economics , location model , product (mathematics) , quality (philosophy) , welfare , social welfare , industrial organization , cournot competition , mathematics , market economy , philosophy , geometry , management , epistemology , political science , law
This paper applies an unconstrained Hotelling linear city model to study the effects of managerial delegation on the firms’ location/product differentiation level in a duopoly industry. It is shown that managerial delegation strongly affects firms’ location/product differentiation choice, both in the simultaneous and sequential moves in one of the three‐stage location‐incentive‐pricing game structure of the model. While sequential moves in the location distance/quality differentiation stage decrease the distance among firms, sequential moves in the incentive‐pricing stages increase it. The social welfare consequences are analysed.