Hotelling Location Model, Triangular Distribution, Experienced and Inexperienced Consumers

Document Type : Research Paper

Authors

Faculty of Economics and Management, Urmia university, Urmia, Iran

Abstract

Appropriate decision-making in the firm’s location choice can play a crucial role in improving the competitiveness and profitability of the firms. The basic presumption of most existing location studies is the assumption of uniform distribution, which is less common in the real world. In contrast, the distribution of consumers may be in the form of a triangle in which consumers gather in the city center. On the other hand, the type of consumers in terms of experienced and inexperienced consumers can also play an effective role in the demand for firm products. Therefore, this study aims to investigate the Hotelling location model with the assumption of a triangular distribution of consumers and experienced and inexperienced consumer types. In this study, optimal location has been analyzed assuming two types of experienced and inexperienced consumers, distributed with a triangular distribution density function. The results indicate that the demand functions of two firms depend on the acquired desirability of a particular type of food and the number of experienced consumers. The unit Nash equilibrium costs are increasing compared to transportation costs. In addition, with an increase in transportation costs, firm 1 approaches the center, and firm 2 gets away from it. Furthermore, if two firms are located at the same point, they do not demand uniform equilibrium prices, and the price of each firm is more sensitive to the location of the other first than its location.

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History

  • Receive Date: 29 January 2021
  • Revise Date: 17 April 2021
  • Accept Date: 08 May 2021

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