Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127385
Authors: 
Kauffeldt, Florian
Wiesenfarth, Boris
Year of Publication: 
2014
Series/Report no.: 
Discussion Paper Series, University of Heidelberg, Department of Economics 562
Abstract: 
We analyze a Hotelling location-then-price duopoly game under demand uncertainty with uniformly distributed consumers in a standard quadratic costs scenario. The novelty of our approach consists of assuming that firms' beliefs are represented by non-extreme-outcome-additive (neo-additive) capacities. We derive firms' subgame-perfect product design decisions under ambiguity. Furthermore, we investigate the influence of ambiguity and ambiguity attitude on equilibrium product differentiation and contrast our results with an environment of risky firms. We find that the impact of the degree of confidence or ambiguity is particularly significant when it comes to delivering accurate explanations for a wide range of phenomena related to observed product design behavior.
Subjects: 
Hotelling
Confidence
Optimism
Pessimism
Degree of Ambiguity
Choquet Expected Utility
Neo-additive Capacities
Product Differentiation
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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