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Spatial competition and collaboration networks

Spatial competition and collaboration networks We model the formation of collaboration networks among firms that are located in a circular city as a two-stage game. In the first stage, the firms form collaboration links, and in the second stage, they engage in price competition. If two firms form a link, their production costs in the second stage are reduced. The second stage is a generalization of Salop’s (Bell J Econ 10(1):141–156, 1979) circular city model. We provide a complete characterization of equilibrium prices of the model. We show that a firm prefers forming a link with a more distant firm if the cost-reducing effects are the same. We discuss the stability and social efficiency of the collaboration networks. When link costs are small, there is no conflict between efficiency and stability of networks. When link costs are significant, there is a conflict between efficiency and stability of networks. We also examine the average distances between linked firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Game Theory Springer Journals

Spatial competition and collaboration networks

International Journal of Game Theory , Volume 41 (3) – Jul 23, 2011

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References (16)

Publisher
Springer Journals
Copyright
Copyright © 2011 by Springer-Verlag
Subject
Economics; Economic Theory/Quantitative Economics/Mathematical Methods; Game Theory, Economics, Social and Behav. Sciences; Behavioral/Experimental Economics; Operation Research/Decision Theory
ISSN
0020-7276
eISSN
1432-1270
DOI
10.1007/s00182-011-0297-3
Publisher site
See Article on Publisher Site

Abstract

We model the formation of collaboration networks among firms that are located in a circular city as a two-stage game. In the first stage, the firms form collaboration links, and in the second stage, they engage in price competition. If two firms form a link, their production costs in the second stage are reduced. The second stage is a generalization of Salop’s (Bell J Econ 10(1):141–156, 1979) circular city model. We provide a complete characterization of equilibrium prices of the model. We show that a firm prefers forming a link with a more distant firm if the cost-reducing effects are the same. We discuss the stability and social efficiency of the collaboration networks. When link costs are small, there is no conflict between efficiency and stability of networks. When link costs are significant, there is a conflict between efficiency and stability of networks. We also examine the average distances between linked firms.

Journal

International Journal of Game TheorySpringer Journals

Published: Jul 23, 2011

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