"Endogenous sequential entry in a spatial model revisited"
JEL codes: D11, L13
Keywords: Hotelling model, entry deterrence, strategic location choice
Abstract: This article reexamines sequential entry of firms in a Hotalling model of spatial product differentiation as analyzed by Neven (1987). I show that the pattern of locations is generally asymmetric in the case of a duo-poly. Profits are non-monotonic in market size, even in the range where the number of firms does not change. The firm that bears the "burden" of entry deterrence gains from lower barriers to entry as long as entry deterrence is possible. Equilibrium profits of all firms may be larger in situations in which more firms are active.