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)
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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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Find related papers by JEL classification: L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection R41 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Transportation: Demand, Supply, and Congestion R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
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