27.2.The Hotelling Model

3-Second Blueprint (English)

1. Under Bertrand competition with identical goods, price competition drives equilibrium price down to marginal cost.
2. In Hotelling's fixed-price model on a uniform interval, two firms converge to the midpoint Nash equilibrium with zero differentiation.
3. In a two-stage game where product location precedes pricing, firms maximally differentiate in stage one to soften price competition.