On the existence of spatial monopolies under free entry
AbstractIn a model of horizontal product differentiation, we show that local monopolies may exist under free entry when capital is perfectly mobile. In contrast both with the situation of restricted entry and with the zero-profit approach to free entry outcomes of Salop (1979), the unit profit rate of incumbent monopolists is positive and bounded above in equilibrium. The upper bound we find decreases with the size of unserved market areas and with the number of incumbent monopolists.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1999001.
Date of creation: 01 Jan 1999
Date of revision:
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horizontal product differentiation; entry; local monopolies; spatial contestability;
Other versions of this item:
- Yves Zenou & Sebastien Steinmetz, 2001. "On the Existence of Spatial Monopolies Under Free Entry," Economics Bulletin, AccessEcon, vol. 4(8), pages 1-10.
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Other Production and Pricing Analysis
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Discussion Paper Series In Economics And Econometrics
0407, Economics Division, School of Social Sciences, University of Southampton.
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