Product and price competition in a cross city model

Abstract

This paper considers duopolistic competition involving product and price in a \\\\\\\\\\\\\\\"cross city\\\\\\\\\\\\\\\" where consumers are uniformly located on two lines crossing each other at their middle points (center). We show that, in a unique equilibrium, one firm is located at the market center while the other firm is at an end of the market. This result is distinguished from the extreme (maximum or minimum) differentiation often found in literature. Moreover, asymmetric locations are obtained even if we assume a simultaneous entry of firms in a symmetric market setting. We also investigate the effects of consumer switching costs on this equilibrium.