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Spatial Competition with Price-Taking Firms


  • Anderson, Simon P
  • Engers, Maxim


The authors consider a price-taking equilibrium in the spatial setting. A (unique) pricing equilibrium is shown to exist for any set of firm locations. This equilibrium is then used to examine locational incentives in the two-stage process in which firms first choose locations anticipating the subsequent price-taking outcome. The result is spatial agglomeration if demand is inelastic and there are only two firms. Agglomeration does not occur if demand is too elastic or if there are more than two firms. Copyright 1994 by The London School of Economics and Political Science.

Suggested Citation

  • Anderson, Simon P & Engers, Maxim, 1994. "Spatial Competition with Price-Taking Firms," Economica, London School of Economics and Political Science, vol. 61(242), pages 125-136, May.
  • Handle: RePEc:bla:econom:v:61:y:1994:i:242:p:125-36

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    References listed on IDEAS

    1. Philip A. Haile & Ali Hortaçsu & Grigory Kosenok, 2008. "On the Empirical Content of Quantal Response Equilibrium," American Economic Review, American Economic Association, vol. 98(1), pages 180-200, March.
    2. Cox, James C. & Friedman, Daniel & Gjerstad, Steven, 2007. "A tractable model of reciprocity and fairness," Games and Economic Behavior, Elsevier, vol. 59(1), pages 17-45, April.
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    Cited by:

    1. Yin, Xiangkang, 2004. "Two-part tariff competition in duopoly," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 799-820, June.
    2. Ricardo Biscaia & Isabel Mota, 2013. "Models of spatial competition: A critical review," Papers in Regional Science, Wiley Blackwell, vol. 92(4), pages 851-871, November.
    3. Hinloopen, Jeroen & Müller, Wieland & Normann, Hans-Theo, 2014. "Output commitment through product bundling: Experimental evidence," European Economic Review, Elsevier, vol. 65(C), pages 164-180.
    4. Hinloopen, Jeroen & Martin, Stephen, 2017. "Costly location in Hotelling duopoly," Research in Economics, Elsevier, vol. 71(1), pages 118-128.
    5. Babaioff, Moshe & Nisan, Noam & Pavlov, Elan, 2009. "Mechanisms for a spatially distributed market," Games and Economic Behavior, Elsevier, vol. 66(2), pages 660-684, July.
    6. Marcus Berliant & Yves Zenou, 2014. "Labor Differentiation and Agglomeration in General Equilibrium," International Regional Science Review, , vol. 37(1), pages 36-65, January.
    7. Wen-Chung Guo & Fu-Chuan Lai, 2015. "Media bias, slant regulation, and the public-interest media," Journal of Economics, Springer, vol. 114(3), pages 291-308, April.
    8. Billings, Stephen B. & Johnson, Erik B., 2016. "Agglomeration within an urban area," Journal of Urban Economics, Elsevier, vol. 91(C), pages 13-25.
    9. Fabian Herweg, 2012. "Relaxing competition through quality differentiation and price discrimination," Journal of Economics, Springer, vol. 106(1), pages 1-26, May.
    10. Yves Zenou, 1996. "Marché du travail et économie urbaine. Essai d'intégration," Revue Économique, Programme National Persée, vol. 47(2), pages 263-288.
    11. Kurt R. Brekke & Robert Nuscheler & Odd Rune Straume, 2006. "Quality and Location Choices under Price Regulation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 207-227, March.
    12. Fabian Herweg, 2007. "Can price discrimination lead to product differentiation? A vertical differentiation model," Bonn Econ Discussion Papers bgse2_2007, University of Bonn, Germany.
    13. Kourandi, Frago & Vettas, Nikolaos, 2010. "Endogenous Spatial Differentiation with Vertical Contracting," CEPR Discussion Papers 7948, C.E.P.R. Discussion Papers.
    14. Guo, Wen-Chung & Lai, Fu-Chuan & Zeng, Dao-Zhi, 2015. "A Hotelling model with production," Mathematical Social Sciences, Elsevier, vol. 73(C), pages 40-49.

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