Econometrica

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

https://doi.org/0012-9682(198901)57:1<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.


Log In To View Full Content