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 different pricing schemes. We show that under certain assumptions the derived equilibria are constrained socially optimal.
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Bibliographic InfoPaper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2007_21.
Date of creation: Aug 2007
Date of revision: Aug 2007
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Postal: Loughborough, Leicestershire, LE11 3TU
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Web page: http://www.lboro.ac.uk/departments/sbe/research/economics/index.html
More information through EDIRC
Monopolistic competition; Transport costs; Endogenous fixed costs; Overlapping market areas;
Other versions of this item:
- Alderighi, Marco & Piga, Claudio A., 2008. "Why should a firm choose to limit the size of its market area?," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 191-201, March.
- 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)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-18 (All new papers)
- NEP-BEC-2007-08-18 (Business Economics)
- NEP-COM-2007-08-18 (Industrial Competition)
- NEP-GEO-2007-08-18 (Economic Geography)
- NEP-IND-2007-08-18 (Industrial Organization)
- NEP-MIC-2007-08-18 (Microeconomics)
- NEP-URE-2007-08-18 (Urban & Real Estate Economics)
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