Hotelling (1929) proposed two stages merchant location competition theory, in this article the principle of minimum difference, broke through in the traditional literature by the quantity competition model and the price competition model primarily merchant theory, in addition d'Aspremont, Gabszexise and Thisse (1979) the principle of maximum difference proposes, causes the economical educational world continuously unceasing discussion and the innovation. This research revises Hotelling (1929) the basic supposition, after joining the merchant to have the marginal cost the supposition as well as the consumer whether voluntarily do bear the travel cost , the discussion merchant solely is leaving the plant the set price system and solely ships under the different price system, the merchant in faces lives to the position in with assigns reigns the merchant factory site and so on under the different structure, how should the merchant choose the most suitable factory site. And separately discusses under two kind of different set prices systems, the merchant had been established when what kind of condition can respectively achieve the principle of minimum difference and the principle of maximum difference , or whether the merchant most suitable position choice can have other situations.

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The aim of the paper is to investigate what impacts that offline stores will have on their existing competition as retailer firms introduce online stores to compete with rivals.Since online markets become much mature and prevalent recently,retailer firms catch up on the trends and operate online stores in succession.On account of online stores' convenience and vast potential customers,the introduction of online stores must have a great influence on those offline stores that already in the market.Therefore,we analyze the threat that offline stores may confront with lots of perspectives after online stores¡¦ introduction.In addition,under the circumstances that the government imposes sales tax on online stores and offline stores,we compare their after-tax profits with their pre-tax profits while online stores are vulnerable to evade taxation.

The first essay provides an introduction into the literature of spatial competition models and studies their predictions on the degree of horizontal product differentiation. For this purpose a selection of articles, mainly from the game theoretical strand of the literature, is re-examined in which each model extends and modifies basic parameters of the original model of Hotelling (1929). The literature survey emphasizes that markets consisting of intersecting roads represent a particular fruitful subject of future research. The nature of competition in this market setting is different compared to the linear city exemplified by the importance of asymmetrical location patterns. Consequently, the strategic interaction, firms' profit-maximizing behavior and potential equilibrium outcomes under sequential entry in a market with intersecting roads remain to be an interesting field to study. The second essay addresses this research gap and based on the work of Anderson (1987) studies a two-stage market entry game in a spatially extended Hotelling's duopoly. Particularly, the effect of a demand dependent centrality bonus Z distributed in the middle of the linear city is examined on the reaction functions of an incumbent firm and the strategic entry decision of an entrant firm. A solution is provided for an entry accommodating scenario where both players optimize profits over their strategic variables and the center Z is taken by the incumbent firm. The results further suggest that the entrant is not capable of capturing Z. In addition, the model implies a lower degree of product differentiation as Z increases. A comparison with the literature shows that these results are well in line with Anderson's model for Z = 0. In a business strategy view the outcome supports the thesis of Gelman & Salop (1983), coined by the term 'judo economics', since the entrant earns highest profits by committing himself to a distant location and charging a comparatively lower price than the incumbent. The third essay analyzes the price distribution of diesel in the Austrian retail gasoline market and tests predictions of the impact of the fraction of informed and uninformed consumers on the mean price and price variance. Further, introducing two measures of spatial competition, the relation of local competition between stations and the mean and variance are examined. In a pooled cross-section analysis a two step approach is followed. Initially, price levels are estimated with respect to the influence of competition, search costs, stations' location and further station-specific characteristics. Controlling for these observable price characteristics, the residuals are used in the second step to investigate the behavior of the price variance. In addition to OLS, to account for spatial spillover effects a Spatial Error Model (SEM) is applied to estimate the price function. Additionally, tests on model specification and robustness checks using different weighting matrices, search cost proxies and dispersion measures are carried out. The results reveal a negative (positive) correlation between the fraction of informed (uninformed) consumers and the mean price. Further, price variance shows an inverse U-shape with the fraction of informed consumers. Thus, the variance initially increases as the proportion of informed consumers increases and starts to decline after the share of informed exceeds a threshold of roughly 43%. These findings are in line with predictions of classical search models, most notably Stahl (1989), and empirically support the meaning of consumer search in the context of oligopolistic pricing. Further, the mean price decreases as competition intensifies whereas the Price variance increases under increased entry competition (Janssen & Moraga-Gonzalez (2004), Carlson & McAfee (1983)). This suggests stations' tendency to focus more strongly on the lower price segment as competition increases.

The price pass-through relationship of retail gasoline markets in the United States has been examined on several levels. This dissertation takes two unique approaches to examine the pass-through behavior (1) a seemingly unrelated regressions model to survey regional differences in gasoline markets and (2) a pooled panel error-correction approach to analyze the effects of spatial competition on local Mississippi gasoline markets. The first model showed the presence of rockets and feathers on a regional level in the US. Moreover, every PADD had a long run asymmetric price pass-through relationship. I included variables to capture the effect of Hurricane Katrina. The inclusion of the Katrina variable indicated only the immediate period after the storm changed the pass-through behavior. Additionally, the market returned to the pre-Katrina pass-through relationship twelve weeks after the storm. The pooled panel model showed the presence of rockets and feathers in the state of Mississippi. It also indicated that the presence of spatial competition does have an effect on the price pass-through behavior. Moreover, the exact distance to the closest competitor did have a significant effect on the price pass-through relationship.

Economic growth is a major concern for state governments. One method that states use to spur economic growth is recruiting firms to relocate or expand within their state. Headlines and press releases from high–profile recruitment cases suggest that states compete with each other to recruit firms. The primary question in this dissertation is whether states compete to recruit firms. A unique panel data set that captures a state’s firm recruitment effort now provides the opportunity to answer this question. A variety of econometric methods (2SLS, MLE, and GS2SLS–GMM) isolate the spatial interdependence effect, and the empirical results show states do compete with each other to recruit firms. Another question answered in this dissertation is whether it matters how researchers measure a state’s effort to recruit firms. The results reveal that it is important to capture only spending related to firm recruitment, as other measures provide fundamentally different results. In addition, this dissertation tests for the nature of rivalry between states and shows that states compete with other states that are economically or demographically similar. The results of competition are not only robust, but large in magnitude as well. States are very responsive to their rival’s effort to recruit firms. Can states stop spending on firm recruitment? If they do, the other states will capture their potential firms–thus the competition to recruit firms does not seem likely to end soon.

This dissertation studies how different voter characteristics and electoral rules affect the incentives and decisions to seek political office. The focus is on generalizing standard approaches to observed differences in the runoff rule and incorporating more accurate descriptions of voter behavior which may not be fully rational. In each chapter, I consider a model of strategic entry by candidates for office in democratic elections. In the first chapter, I incorporate the observed differences in thresholds for first-round victory in a model of runoff elections. The set of equilibria varies substantially with the threshold, indicating that the 50 percent threshold used in most models is not innocuous. The set of equilibria immediately contains equilibria that were thought to exist only under plurality rule, whereas for thresholds above 50 percent, there is no change in the set of equilibria. Additionally, for any threshold under one half, there exist equilibria in which a candidate who loses with certainty still chooses to run. The set of two candidate equilibria is invariant to all thresholds under one third, and the set of multicandidate equilibria is invariant to all thresholds above one half. In the second chapter, I introduce aggregate uncertainty by making candidates unsure of the distribution of voter preferences in the electorate. The set of three candidate equilibria expands and equilibrium platforms become more diverse. This provides a theoretical basis for Duverger’s Hypothesis. Equilibria also feature two common empirical phenomena. For instance, some candidates choose to enter despite losing with certainty in equilibrium. Also, in some equilibria, a Condorcet winning candidate (a candidate who would win every pairwise election) fails to win the election. In the third chapter, I generalize the citizen-candidate model to a multidimensional setting and characterize the set of equilibria. I later incorporate two well-documented violations of the Weak Axiom of Revealed Preference in a model of plurality elections: the compromise and attraction effects. Entry by an extreme candidate may shift the frame of reference for some voters in ways which favor particular moderate candidates. Incorporating these preferences generate equilibria in which extremist candidates enter plurality elections in order to attractively frame their preferred moderate, even if the extremist has probability zero of obtaining office themselves.

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We empirically investigate the importance of centrality (holding a central position in a spatial network) for strategic interaction in pricing for the Austrian retail gasoline market. Results from spatial autoregressive models suggest that the gasoline station located most closely to the market center - defined as the 1-median location - exerts the strongest effect on pricing decisions of other stations. We conclude that centrality influences firms' pricing behavior and further find that the importance of centrality increases with market size. (authors' abstract) / Series: Department of Economics Working Paper Series

This article investigates the influence of competition on price and product quality among Austrian camping sites, a market characterized by both horizontal (spatial) and vertical product differentiation. Theoretically, the effect of competition on quality is ambiguous and depends on the degree of cost substitutability between output and quality. Estimating a system of equations shows that intense competition has a positive impact on product quality and a negative effect on prices (conditional on quality). As high quality is associated with high prices, the total effect of competition on prices is rather small.