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Welfare properties of spatial competition with location-dependent costs

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  • Aiura, Hiroshi
  • Sato, Yasuhiro

Abstract

We analyze a two-firm spatial competition model in which firms must transport raw materials from a raw material site to their locations in order to produce. The model has two equilibrium configurations: (i) a symmetric one in which firms locates equidistantly from the raw material site, and (ii) an asymmetric one in which one firm locates at the raw material site and the other locates distantly from it. We show that these two configurations are possible as multiple equilibria, that the asymmetric equilibrium is more efficient than the symmetric one, and that the social welfare first falls then rises as transport costs decline.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 38 (2008)
Issue (Month): 1 (January)
Pages: 32-48

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Handle: RePEc:eee:regeco:v:38:y:2008:i:1:p:32-48

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Web page: http://www.elsevier.com/locate/regec

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References

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  1. Matsushima, Noriaki, 2004. "Technology of upstream firms and equilibrium product differentiation," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1091-1114, November.
  2. Lai, Fu-Chuan & Tsai, Jyh-Fa, 2004. "Duopoly locations and optimal zoning in a small open city," Journal of Urban Economics, Elsevier, vol. 55(3), pages 614-626, May.
  3. Tabuchi, Takatoshi & Thisse, Jacques-Francois, 1995. "Asymmetric equilibria in spatial competition," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 213-227.
  4. Ziss, Steffen, 1993. "Entry deterrence, cost advantage and horizontal product differentiation," Regional Science and Urban Economics, Elsevier, vol. 23(4), pages 523-543, September.
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Cited by:
  1. Marco Alderighi & Claudio A. Piga, 2008. "The Circular City with Heterogenous Firms," Working Paper Series 16-08, The Rimini Centre for Economic Analysis, revised Jan 2008.
  2. Ricardo Biscaia & Paula Sarmento, 2013. "Location Decisions in a Natural Resource Model of Cournot Competition," ERSA conference papers ersa13p1146, European Regional Science Association.
  3. Noriaki Matsushima & Tomomichi Mizuno, 2009. "Input specificity and product differentiation," ISER Discussion Paper 0745, Institute of Social and Economic Research, Osaka University.
  4. João Correia-da-Silva & Joana Pinho, 2011. "Costly horizontal differentiation," Portuguese Economic Journal, Springer, vol. 10(3), pages 165-188, December.
  5. Kourandi, Frago & Vettas, Nikolaos, 2010. "Endogenous Spatial Differentiation with Vertical Contracting," CEPR Discussion Papers 7948, C.E.P.R. Discussion Papers.

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