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Imperfect Competition and Congestion in a City with asymmetric subcenters

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Author Info

  • Andre de Palma

    (Université de Cery Pontoise, France - CORE, UCL, Belgium)

  • Stef Proost

    ()
    (K.U.Leuven-Center for Economic Studies - CORE, UCL, Belgium)

  • Fay Dunkerley

    ()
    (K.U.Leuven-Center for Economic Studies)

Abstract

This paper develops a model for the monopolistic competition of subcenters for the shoppers and workers of a central city. The model is an extension of the de Palma & Proost (2004) model that is limited to the symmetric case. Inhabitants of a CBD can choose one of the subcenters to buy a differentiated product and choose one of the subcenters to supply differentiated labour. The subcenters compete in prices and wages and the access to the subcenters can be congested. The short term and free entry equilibria are studied. As general properties are rare in the non-symmetrical monopolistic competition case, this paper draws more on numerical examples than on hard theorems. Starting from a symmetric base case, the paper explores the effects on welfare and number of subcenters of introducing diversity in the distances to the subcenter, quality of the subcenters, congestion and attractiveness of the subcenter as workplace. The paper shows cases where asymmetry can increase welfare and where the order in which firms enter the market matters for the equilibrium outcome.

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Bibliographic Info

Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment in its series Energy, Transport and Environment Working Papers Series with number ete0411.

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Length: 21 pages
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:ete:etewps:ete0411

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Related research

Keywords: Road Pricing; Product Di.erentiation; Location Theory; New Economic Geography; Congestion.;

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  1. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-79, March.
  2. Anderson, Simon P & de Palma, Andre, 2001. "Product Diversity in Asymmetric Oligopoly: Is the Quality of Consumer Goods Too Low?," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 113-35, June.
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Cited by:
  1. Andre de Palma & Dunkerley Fay, 2006. "Trip Chaining: Who Wins Who Loses?," Energy, Transport and Environment Working Papers Series ete0605, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.

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