Hotelling Meets Weber

In this paper, spatial competition between two sellers in a market (Hotelling, 1929) and total transportation costs minimization (Weber, 1909) are combined, and equilibrium and optimum locations of \u85rms are analyzed along with the con-sequent policy implications. We show that when the output prices are \u85xed and equal, both \u85rms agglomerate at the market center, irrespective of the distribu-tion of inputs. Further, we also show that when output price is endogenous, the middle point of \u85rm locations in Hotellings model is identical to the Weber point. Finally, we show that the locations of Hotellings \u85rms are far from the socially optimal location