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Localization and prices in the quadratic Hotelling model with uncertainty

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  • For the quadratic Hotelling model, we study the optimal localization and price strategies under incomplete information on the production costs of the firms. We compute explicitly the pure Bayesian-Nash price duopoly equilibrium and we prove that it does not depend upon the distributions of the production costs of the firms, except on their first moments. We find when the maximal differentiation is a local optimum for the localization strategy of both firms.
    Mathematics Subject Classification: Primary: 91A40; Secondary: 91B24, 91B38.

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