The Expansion of Location Theories of Firms and Products’ Consistency Using Triangular Distribution Approach

Authors

Faculty of Economics and Management, Urmia University, Urmia, Iran

Abstract

Abstract

One of the main criticisms of location models is simplistic assumptions concerning the consumers’ distribution on the street or city. The location models usually make use of uniform distribution of consumers while it is not true in reality, and mostly the consumers’ accumulation is more in the city centers rather than suburb areas. This study deals with selection of optimal location of firms using Lijesen and Reggiani (2013) spoke model and changing the consumers’ distribution from uniform to triangular in a two-step game. In this game, the firms select their location, at the first stage, and enter the price competition at the second stage. Results indicate that the increased number of streets and transportation costs leads to price increase and this indicates that the farther away are the firms from each other, their competition in the market would decrease and the price would increase. If both firms are located in the same distance from city center, they would gain the same market share and more inclined toward being closer to city center or having minimum distance. Moreover, when in the consistency issue include the triangular distribution, Nash equilibrium price is less compared with Rohlfs model (1971) and a greater range of consumers purchase the product. 

Keywords

References

References
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Iranian Economic Review
Volume 21, Issue 3
September 2017
Pages 497-518

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