Cooperation vs. competition in a spatial model

This paper discusses the element of cooperation between firms in the form of information exchange through communication into the Hotelling spatial competition model. It is shown that subgame perfect equilibrium in a two-stage game can be achieved in a wide range from minimum differentiation to maximum differentiation, depending upon the relative strength of the cooperation effect over the competition effect. This result is exemplified in the economics of the Silicon Valley. (C) 1999 Elsevier Science B.V. All rights reserved.