Spatial Competition , Sequential Entry , and Technology Choice

This article introduces technology choice into a Hotelling model of spatial competition. This yields two entry deterrence devices, as well as complex strategic choices for the firms and a rich picture of industry structure. Depending on cost parameters and market size, firms may choose to over-invest or to under-invest. Industry structure is typically asymmetric either in terms of the locations chosen or the technologies used or in both. I find excessive entry deterrence, second-mover advantage as well as delegation of entry deterrence. Both the number of firms and the equilibrium prices may be non-monotonic in market size. Larger markets may exhibit higher prices.