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Three equivalent Salop models and their normative representative consumer

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  • Steffen Hoernig

Abstract

We show that three location models on the Salop circle, involving linear or quadratic transport cost, and asymmetric locations or fixed benefits, are equivalent: they lead to the same demand functions and consumer surplus. The only exception is the case of asymmetric lo- cations with an even number of firms, which has one less degree of freedom. These models are also fully equivalent to a normative rep- resentative consumer whose indirect utility is given by the standard Salop consumer surplus. This result provides a further unification of location and representative consumer models.

Suggested Citation

  • Steffen Hoernig, 2015. "Three equivalent Salop models and their normative representative consumer," Nova SBE Working Paper Series wp593, Universidade Nova de Lisboa, Nova School of Business and Economics.
    • Handle: RePEc:unl:unlfep:wp593
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    References listed on IDEAS

    as
    1. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    2. Duarte Brito & Pedro Pereira, 2010. "Access to Bottleneck Inputs under Oligopoly: A Prisoners’ Dilemma?," Southern Economic Journal, John Wiley & Sons, vol. 76(3), pages 660-677, January.
    3. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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    More about this item

    Keywords

    Salop model; representative consumer;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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