Netlogo - Hotelling Model

This project utilizes Netlogo as a visualization tool to demonstrate the Hotelling model. Named after Harold Hotelling’s paper “Stability in Competition,” the Hotelling model illustrates how businesses compete on both price and location. This framework provides an understanding of how firms strategically position themselves with regards to their competition in order to maximize their consumer base.

The model illustrates a linear city with firms and consumers positioned along a line. Consumers are uniformly distributed and firms sell identical goods. Consumers incur a transportation cost when they purchase from these firms, making the firm’s location a deciding factor into customer’s decisions. The total cost of purchase is as follows: p_i + t(d_i), with “p_i” being the price set by a firm, “t” being the transportation cost, and “d_i” being the distance to that given shop.

The Netlogo model, as shown in the highlighted picture helps illustrate this concept and allows for the user to manipulate the different variables, such as number of customers, price of a given shop, where they are positioned, and cost of transportation.

I am a believer in creatively utilizing vizualization tools to explain complex economic concepts, and Netlogo has a suitable interface to bring the Hotelling model’s concept of price-location placement to life.