Location-then-Price Competititon with Uncertain Consumer Tastes
We investigate Hotelling's duopoly game of location-then-price choices with quadratic transportation costs and uniformly distributed consumers under the assumption that firms are uncertain about consumer tastes. When the uncertainty has a uniform distribution on the closed interval [-L/2,L/2], with 0 < L < ∞, we characterize the unique equilibrium and the socially optimal locations. Contrary to the individual-level random utility models, we find that uncertainty is a differentiation force. For...[Show more]
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