TY - JOUR
T1 - A Hotelling model with production
AU - Guo, Wen Chung
AU - Lai, Fu Chuan
AU - Zeng, Dao Zhi
N1 - Funding Information:
We wish to thank two anonymous referees for their highly valuable and detailed comments. The financial support from JSPS KAKENHI of Japan (Grant Numbers 26380282 , 24330072 and 24243036 ) for the third author is acknowledged.
PY - 2015/1/1
Y1 - 2015/1/1
N2 - This paper extends the Hotelling model of spatial competition by incorporating the production technology and labor inputs. A duopolistic game is constructed in which firms choose their locations simultaneously in the first stage, and decide the prices of the product and wages of labor in the second stage. We find that the equilibrium locations depend on the production technology. Specifically, when productivity increases, the two firms change from dispersion to agglomeration and then to dispersion again. We then analyze the case with a minimum wage requirement and show the robustness of the equilibrium locations. Furthermore, the socially optimal locations do not depend on the production technology and the minimum wage requirement. However, a higher minimum wage increases unemployment and prices, which may reduce the total welfare level.
AB - This paper extends the Hotelling model of spatial competition by incorporating the production technology and labor inputs. A duopolistic game is constructed in which firms choose their locations simultaneously in the first stage, and decide the prices of the product and wages of labor in the second stage. We find that the equilibrium locations depend on the production technology. Specifically, when productivity increases, the two firms change from dispersion to agglomeration and then to dispersion again. We then analyze the case with a minimum wage requirement and show the robustness of the equilibrium locations. Furthermore, the socially optimal locations do not depend on the production technology and the minimum wage requirement. However, a higher minimum wage increases unemployment and prices, which may reduce the total welfare level.
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U2 - 10.1016/j.mathsocsci.2014.11.005
DO - 10.1016/j.mathsocsci.2014.11.005
M3 - Article
AN - SCOPUS:84918813465
VL - 73
SP - 40
EP - 49
JO - Mathematical Social Sciences
JF - Mathematical Social Sciences
SN - 0165-4896
ER -