  We consider the explicit introduction of firms' choice of location to
Varian's model of sales for a two-stage spatial competition model based on a
standard Hotelling's linear city model. This model is the formalization of
Varian's model of sales in the context of Hotelling's spatial competition. We
obtain three main results. First, we show that there exists a subgame perfect
equilibrium in which each firm chooses a symmetric mixed strategy equilibrium
profile. This equilibrium includes symmetric location pairs and asymmetric
location pairs. Second, the equilibrium behaviors in our model are randomized
at both location and price stages. Third, we show that expected profits in a
subgame perfect equilibrium are equal to the maximum monopoly profit from an
uninformed market. Thus, even when product differentiation is explicitly
introduced into a Varian-type model, Varian's implication can be retained; the
opportunity for profit in an informed market is lost with competition.
