Sequential location games

Abstract

We study location games where market entry is costly and occurs sequentially, and where consumers are nonuniformly distributed over the unit interval. We show that for certain classes of densities, including monotone and-under some additional restrictions-hump-shaped and U-shaped ones, equilibrium locations can be determined independently of when they are occupied. Our analysis reveals a number of peculiarities of the uniform distribution. Extensions of the model allow for price competition and advertisement in media markets, winner-take-all competition, trade-offs between profits in the short and the long run, and firms operating multiple outlets. © 2011, RAND.