Spatial Competition and Firms Location Decision under Cost Uncertainty, FEP Working Paper, n. 445, 2012

• Type: Academic Work
• Date: 2012

Authors

Ricardo Biscaia (Author) FEP; Paula Sarmento (Author) FEP

Indexing

EBSCO

Scientific classification

FOS: Social sciences > Economics and Business

CORDIS: Social sciences > Economics

Other information

Abstract (EN): This paper considers a two-staged Location-Price game à la Hotelling, where firms first choose location and then set prices. A lack of information arises, because before choosing location firms are not sure about the marginal costs. However, they know the two possible outcomes in advance. We conclude that contrary to the perfect information case, firms may agglomerate, given that the difference between their possible marginal costs is sufficiently high for either firm. Also, we find that in most cases both firms are better off with imperfect information, which explains firms' incentives to develop cost reduction activities, such as R&D.

Language: English

Type (Professor's evaluation): Scientific

Notes: Disponível em http://www.fep.up.pt/investigacao/workingpapers/wp445.pdf