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Cost inefficiency and Optimal Market Structure in Spatial Cournot Discrimination

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Author Info

  • Ricardo Biscaia

    ()
    (CIPES - Centro de Investigação de Políticas de Ensino Superior)

  • Paula Sarmento

    ()
    (FEP - Faculdade de Economia do Porto)

Abstract

This paper analyzes the location patterns of firms in Cournot spatial discrimination setting. The innovation step is that firms are allowed to have different marginal costs of the production. When analyzing the two-stage location-quantity game, we conclude that firms choose the central agglomeration outcome whatever the marginal cost difference between them. When maximizing social welfare, the social planner chooses the central location for both firms as well if the marginal cost differences are not too big. When allowed to decide if the inefficient firm should be in the market or not, the social planner removes the inefficient firm from the market if its cost is too high.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 462.

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Length: 14 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:por:fepwps:462

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Related research

Keywords: Spatial Competition; Cournot Discrimination; Market Structure; Cost Differentials;

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  1. Liliana Fernandes & Américo Mendes & Aurora Teixeira, 2012. "Assessing child well-being through a new multidimensional child-based weighting scheme index: an empirical estimation for Portugal," Working Papers de Economia (Economics Working Papers) 02, Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto).
  2. Vera Catarina Rocha, 2012. "The entrepreneur in economic theory: from an invisible man toward a new research field," FEP Working Papers 459, Universidade do Porto, Faculdade de Economia do Porto.
  3. Raquel Meneses & Carlos Brito, 2012. "A Dynamic Approach To The Development Of International New Ventures," FEP Working Papers 454, Universidade do Porto, Faculdade de Economia do Porto.
  4. Sara Santos Cruz & Aurora A.C. Teixeira, 2012. "Industry-based methodological approaches to the measurement of Creative Industries: a theoretical and empirical account," FEP Working Papers 453, Universidade do Porto, Faculdade de Economia do Porto.
  5. Duarte Guimarães & Ana Paula Ribeiro & Sandra Tavares Silva, 2012. "Macroeconomic Fundamentals of Poverty and Deprivation: an empirical study for developed countries," FEP Working Papers 460, Universidade do Porto, Faculdade de Economia do Porto.
  6. Sara Santos Cruz & Aurora A.C. Teixeira, 2012. "Methodological approaches for measuring the creative employment: a critical appraisal with an application to Portugal," FEP Working Papers 455, Universidade do Porto, Faculdade de Economia do Porto.
  7. Duarte N. Leite & Sandra T. Silva & Óscar Afonso, 2012. "Institutions, Economics and the Development Quest," FEP Working Papers 457, Universidade do Porto, Faculdade de Economia do Porto.
  8. Jurriën J. Bakker & Oscar Afonso & Sandra T. Silva, 2012. "The effects of autocatalytic trade cycles on economic growth," FEP Working Papers 451, Universidade do Porto, Faculdade de Economia do Porto.
  9. Pedro Cosme Costa Vieira, 2012. "A low cost supercritical Nuclear + Coal 3.0 Gwe power plant," FEP Working Papers 461, Universidade do Porto, Faculdade de Economia do Porto.
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