We are grateful to two anonymous referees and the coeditor for their comments and suggestions. The article has also benefited from comments by Alexei Alexandrov, Simon Anderson, Helmut Bester, Steve Callander, Jacob Goeree, Imogen Halstead, Kate Ho, Armin Schmutzler, Andrew Sweeting, Thomas Tröger, Jonathan Vogel, and seminar participants at the Universities of Aachen, Bern, Bielefeld, Bonn, Hamburg, Heidelberg, Mannheim, Melbourne, Munich, and Virginia, the Queensland University of Technology, IIOC 2007 in Savannah, ESAM 2007 in Brisbane, and EARIE 2008 in Toulouse. Muehlheusser gratefully acknowledges financial support from the Swiss National Science Foundation as well as the hospitality of Northwestern University’s Kellogg School of Management.
Sequential location games
Article first published online: 19 DEC 2011
© 2011, RAND.
The RAND Journal of Economics
Volume 42, Issue 4, pages 639–663, Winter 2011
How to Cite
Loertscher, S. and Muehlheusser, G. (2011), Sequential location games. The RAND Journal of Economics, 42: 639–663. doi: 10.1111/j.1756-2171.2011.00148.x
- Issue published online: 19 DEC 2011
- Article first published online: 19 DEC 2011
We study location games where market entry is costly and occurs sequentially, and where consumers are nonuniformly distributed over the unit interval. We show that for certain classes of densities, including monotone and—under some additional restrictions—hump-shaped and U-shaped ones, equilibrium locations can be determined independently of when they are occupied. Our analysis reveals a number of peculiarities of the uniform distribution. Extensions of the model allow for price competition and advertisement in media markets, winner-take-all competition, trade-offs between profits in the short and the long run, and firms operating multiple outlets.