Author: Kaiwen Leong
Institution: Boston University
Date: February 2005
Abstract
Startups vie for strategic positions in densely populated cities by paying high prices for rent, since the customer base they can establish is larger compared to suburban areas. For this paper, firms locate sequentially basing their decisions on correct expectations as to how their competitors locate and market-players face a non-uniform density function of customers. The solution is obtained using backward induction. Three types of market structures will be considered in this paper: duopoly, oligopoly, and perfect competition. The nature of these equilibriums differs from conventional papers in that firms face a uniform density of customers.