Guo and Lai (2014) argue that, under quadratic transport costs, when two offline firms compete with one online firm, the two offline firms locate in such a way that they occupy unconnected regions in the market. However, we offer a counterexample to show that their provided condition is not sufficient to support existence of subgame perfect equilibria, because location deviations to different market structures are not taken into account.
Colombo, S., Hou, Z., On spatial competition with quadratic transport costs and one online firm, <<THE ANNALS OF REGIONAL SCIENCE>>, 2019; (63): 241-247. [doi:10.1007/s00168-019-00934-x] [http://hdl.handle.net/10807/141804]
On spatial competition with quadratic transport costs and one online firm
Colombo, Stefano
;Hou, Zemin
2019
Abstract
Guo and Lai (2014) argue that, under quadratic transport costs, when two offline firms compete with one online firm, the two offline firms locate in such a way that they occupy unconnected regions in the market. However, we offer a counterexample to show that their provided condition is not sufficient to support existence of subgame perfect equilibria, because location deviations to different market structures are not taken into account.
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