Hotelling meets Holmes : the importance of returns to product differentiation and distribution economies for the firm's optimal location choice

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dc.contributor.author Erdmann, Anett
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Economía
dc.date.accessioned 2014-10-10T12:27:57Z
dc.date.available 2014-10-10T12:27:57Z
dc.date.issued 2014-06-01
dc.identifier.issn 2340-5031
dc.identifier.uri http://hdl.handle.net/10016/19468
dc.description.abstract Inspired by the empirical work of Holmes (2011), which suggests the economic importance of distribution costs in the firm's optimal location decision, this paper introduces endogenous distribution costs in the model of Hotelling (1929). The proposed model shows an interesting trade-off between demand and cost considerations when a firm plays a hybrid location strategy. Given the location of local distribution centers and agents' displacement cost parameters, it is shown that, under certain conditions, the optimal location of the firms are in the interior of the Hotelling line rather than at the edges of the line. The supply cost effect which drives this result diminishes with the distance of the distribution center from the market so that the scale of the distribution area becomes also determinant for an optimal location strategy. The theoretical results are complemented with an empirical analysis for distribution intensive grocery retailers using location data for the two main conventional supermarket chains in the U.S. The data suggest that the firms consider distribution costs when differentiating from the competitor.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries UC3M Working Papers Economics
dc.relation.ispartofseries 14-20
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Firm strategy
dc.subject.other Product differentiation
dc.subject.other Distribution costs
dc.subject.other Price competition
dc.subject.other Location choice
dc.subject.other Retail competition
dc.title Hotelling meets Holmes : the importance of returns to product differentiation and distribution economies for the firm's optimal location choice
dc.type workingPaper
dc.subject.jel L13
dc.subject.jel L22
dc.subject.jel L81
dc.subject.jel D43
dc.subject.jel R10
dc.subject.jel R30
dc.rights.accessRights openAccess
dc.type.version submitedVersion
dc.identifier.uxxi DT/0000001281
dc.identifier.repec we1420
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