Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jan, 1989, Volume 57, Issue 1

Noncooperative Bargaining and Spatial Competition<97:NBASC>2.0.CO;2-1
p. 97-113

Helmut Bester

The paper presents a bargaining approach to spatial competition. Sellers compete by choosing locations in a market region. Consumers face a cost to moving from one place to another. The price of the good is determined as the perfect equilibrium of a bargaining game between seller and buyer. In this game, the consumer has the outside option to move to another seller so that prices at all stores are interdependent. Existence of a location-price equilibrium is established. The outcome approaches the perfectly competitive one if the consumer's costs of travelling become negligible or if the number of sellers tends to infinity.

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