Spatial competition in networks under delivered pricing

Abstract

We consider a two-stage non-cooperative Bertrand game with location choice involving r firms. There are n spatially separated markets located at the vertices of a network. Each firm first selects the location of a facility and then selects the delivered price in the markets in order to maximise its profit. The article extends the duopolistic model with completely inelastic demand (Lederer and Thisse 1990) to the oligopolistic scenario. Under moderate assumptions, a pure strategy equilibrium, which minimises social costs, exists. Furthermore, an equilibrium location can be obtained by finite steps and consists of vertices only.