Why should a firm choose to limit the size of its market area?
AbstractWe study when a monopolistically-competitive firm may optimally choose to limit the size of its market. This may be the case when the cost of serving the market with geographically dispersed customers is increasing in size. We also investigate the incentives faced by a firm to limit the reach of its market when it adopts two different pricing schemes. We show that under certain assumptions the derived equilibria are constrained socially optimal.
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Bibliographic InfoArticle provided by Elsevier in its journal Regional Science and Urban Economics.
Volume (Year): 38 (2008)
Issue (Month): 2 (March)
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Other versions of this item:
- Marco Alderighi & Claudio A. Piga, 2007. "Why Should a Firm Choose to Limit the Size of its Market Area?," Discussion Paper Series 2007_21, Department of Economics, Loughborough University, revised Aug 2007.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
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