Firms Location Choice in the Case of Presence of a Variety of Consumers (Experienced and Inexperienced)

One of the most important current problems of firms is to find a solution to reduce transport costs due to increased urbanization and urban population. Competitive location models are based on the model proposed by Hotelling with two ice cream vendors in the beach. In this article, initial Hotelling model has been used; however, with consideration of experienced and inexperienced consumers for data analysis. The results showed that in the presence of both experienced and inexperienced consumers, demand functions of two firms (supplying different foods) depend on particular food type and the number of experienced consumers. In addition, if two firms are placed at one point, because of differences in consumer tendencies, they will not demand the same equilibrium prices. If the firm's strategies include the selection of both price and location choice, there will be no equilibrium to the game. Finally, by increasing transport costs, firms1 becomes closer to the center and firms 2 (supplying unqualified goods) become farther from the center.