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Entry Regulation in a Linear Market with Elastic Demand

Author

Listed:
  • Javier Elizalde

    (University of Navarra)

  • Markus Kinateder

    (University of Navarra)

  • Ignacio Rodríguez-Carreño

    (University of Navarra)

Abstract

This work performs a comparative welfare analysis of two types of entry regulation in a duopolistic retail market: number of licenses and minimum distance between stores. In a linear (Hotelling) market we show that a minimum distance rule is beneficial for the consumers and disadvantageous for the firms when demand is sufficiently inelastic. The distance rule that maximises social welfare is one quarter of the market under which firms will be located at the quartiles. Those locations are also optimal under regulated prices. This analysis, which is not yet considered in the literature, is motivated by a change of entry regulation in the drugstore market in the Spanish region of Navarre

Suggested Citation

  • Javier Elizalde & Markus Kinateder & Ignacio Rodríguez-Carreño, 2014. "Entry Regulation in a Linear Market with Elastic Demand," Faculty Working Papers 02/14, School of Economics and Business Administration, University of Navarra.
    • Handle: RePEc:una:unccee:wp0214
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    References listed on IDEAS

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