Partial Cooperation in Location Choice: Salop’s Model with Three Firms

Research output: Chapter in Book/Report/Conference proceedingChapter


We consider how three firms compete in a Salop location model and how cooperation in location choice by two of these firms affects the outcomes. We con- sider the classical case of linear transportation costs as a two-stage game in which the firms select first a location on a unit circle along which consumers are dispersed evenly, followed by the competitive selection of a price. Standard analysis restricts itself to purely competitive selection of location; instead, we focus on the situation in which two firms collectively decide about location, but price their products competitively after the location choice has been effectuated. We show that such partial coordination of location is beneficial to all firms, since it reduces the number of equilibria significantly and, thereby, the resulting coordination problem. Subsequently, we show that the case of quadratic transportation costs changes the main conclusions only marginally.
Original languageEnglish
Title of host publicationSpatial Interaction Models: Facility Location Using Game Theory
EditorsEgidio d'Amato, Lina Mallozzi, Panos Pardalos
Number of pages18
ISBN (Print)978-3-319-52653-9
Publication statusPublished - 2017

Publication series

NameSpringer Optimization and Its Applications
ISSN (Print)1931-6828


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