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Oligopoly on a Salop Circle with Centre

  • Madden Paul

    ()

    (University of Manchester)

  • Pezzino Mario

    ()

    (University of Manchester)

We study an oligopolistic market in which consumers located around the perimeter of a Salop circle buy either from firms around this perimeter (providing horizontally differentiated goods) or from a firm located at the centre of the circle (providing a homogeneous good). An entry-pricing game is studied. The market equilibria and social optima indicate various possible market failures, including cases in which the market is served only by perimeter firms whilst central provision would be socially optimal (in this sense, more extreme than the standard Salop excessive product differentiation). Moreover, for some parameters, the standard Salop result might be reversed.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 11 (2011)
Issue (Month): 1 (January)
Pages: 1-30

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Handle: RePEc:bpj:bejeap:v:11:y:2011:i:1:n:2
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  1. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  2. Sridhar Balasubramanian, 1998. "Mail versus Mall: A Strategic Analysis of Competition between Direct Marketers and Conventional Retailers," Marketing Science, INFORMS, vol. 17(3), pages 181-195.
  3. Bouckaert, Jan, 2000. "Monopolistic competition with a mail order business," Economics Letters, Elsevier, vol. 66(3), pages 303-310, March.
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