Duopoly Pricing Strategy in Spatial Competition Using Constant - sum Games

Abstract

Spatial games focused on imperfect competition are specific area of game theory dealing with behavior of market competitors. This article focuses on the formulation and solution of specific oneround spatial constant-sum game of two players deciding on the location of their branches with aim to attract customers and maximize revenues. The space is characterized by graph, in which nodes represent location of customers and possible place of service. The main goal is to present issue of determining product price of one player, based on predetermined price of his opponent. This determination takes place simultaneously with the location selection of both players.