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Spatial competition with profit‐maximising and labour‐managed firms *
Author(s) -
Lambertini Luca
Publication year - 2001
Publication title -
papers in regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.937
H-Index - 64
eISSN - 1435-5957
pISSN - 1056-8190
DOI - 10.1111/j.1435-5597.2001.tb01216.x
Subject(s) - subgame perfect equilibrium , microeconomics , economics , duopoly , profit (economics) , competition (biology) , cournot competition , nash equilibrium , ecology , biology
The nature of the equilibria arising under spatial differentiation is investigated here in a duopoly model, where at least one firm maximises value added per worker. The study shows that if firms’objectives differ, there exists a subgame perfect equilibrium in pure strategies, which is possibly characterised by asymmetric locations. If both firms are labour‐managed, there exists a (symmetric) subgame perfect equilibrium in pure strategies with firms located at the first and third quartiles, if and only if the setup cost is low enough. Otherwise, undercutting is profitable.