Local market structure in a hotelling town

Abstract

We develop a theoretical framework to study the location-price competition in a Hotelling-type network game, extending the Hotelling model, with linear transportation costs, from a line (city) to a network (town). We show the existence of a pure Nash equilibrium price if, and only if, some ex- plicit conditions on the production costs and on the network structure hold. Furthermore, we prove that the local optimal localization of the firms are at the cross-roads of the town.