The model of duopoly location-then-price game under introduction of rent cost

By introducing rent cost into Hotelling model, this paper studies duopoly´s location-then-price game problem. The conclusions of this paper differ from that of Hotelling model´s ‘minimum differentiation’ location. When the ratio of rent cost rate and transportation cost rate meets certain condition, we find that in equilibrium: (i) firms locate in two ends of the market in the condition of linear rent cost function (i.e. ‘maximum differentiation’ location); (ii) firm´s location only depends on the ratio of rent cost rate and transportation cost rate in the condition of quadratic rent cost function.