Equilibrium location of storage facilities

Using the Vickrey-Salop spatial model, we investigate the optimal choice of storage facilities’ location by two competing firms in the case of a unique wholesale seller and spatial Cournot competition. We show that, in equilibrium, the distance between each storage facility and the wholesale seller decreases with the inbound transportation costs, whereas it might be an inverse U-shape or strictly increasing with the outbound transportation costs. The location of the storage facilities is driven by market serving costs and storage costs. In terms of welfare, the equilibrium dispersion of the storage facilities might be either too small or too large.