Webers, H. (Tilburg University, Faculty of Economics and Business Administration)
Abstract
In this paper we present a generalization of the circular model. In this model there are two concentric circular markets, which enables us to study two types of markets simultaneously. There are switching costs involved for moving from one circle to the other circle, which can also be thought of as transformation costs. Consumers have valuations for the product of the firms, depending on the circle they live on. Equilibrium prices then of course are affected by both switching costs and consumers' valuations. An interesting insight that comes from this approach is that an extension of the circular model may invalidate the familiar principle that free entry is characterized by too many firms. Furthermore we discuss the effect of introducing reservation prices on the equilibrium outcome using a constructive approach.
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Paper provided by Tilburg University, Faculty of Economics and Business Administration in its series Research Memorandum with number
685.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Hamilton, J.H. & Macleod, W.P. & Thisse, J.F., 1988.
"Spatial Competition And The Core,"
Papers
88-6, Florida - College of Business Administration.
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