Global and local players in a model of spatial competition

Loertscher, Simon; Muehlheusser, Gerd (September 2005). Global and local players in a model of spatial competition (Discussion Papers 05-11). Bern: Department of Economics

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We consider Hotelling location games with global and local players. Global players are active in several markets, while local players act in a single market only. The decisive feature is that global players cannot tailor their product to each market but have to choose a location
on the Hotelling line that is valid for all markets in which they are active. Obvious examples include the media industry and politics, where competitors typically compete in several markets with basically the same product. We determine equilibrium configurations for simple
specifications of such games. We then show that the presence of global players tends to induce lower product diversity across markets. Finally, when the number of firms is endogenous, we show how global players may use their location choice as a preemptive device.

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