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On the Existence of Spatial Monopolies Under Free Entry

  • Yves Zenou

    ()

    (University of Southampton, GAINS, Universite du Maine and CEPR)

  • Sebastien Steinmetz

    ()

    (INRA-Grignon, Laboratoire d'Econometrie de l''Ecole Polytechnique)

This paper studies the question of entry in the circular city model when the pre-entry market structure involves local monopolies. In contrast with Salop (1979), we show that the unit profit rate of incumbent monopolists is strictly positive and bounded above. The upper bound decreases with the size of gaps and with the number of incumbents.

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File URL: http://www.accessecon.com/pubs/EB/2001/Volume4/EB-01D40002A.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 4 (2001)
Issue (Month): 8 ()
Pages: 1-10

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Handle: RePEc:ebl:ecbull:eb-01d40002
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  1. MacLeod, W.B. & Norman, G. & Thisse, J.-F., 1988. "Price discrimination and equilibrium in monopolistic competition," International Journal of Industrial Organization, Elsevier, vol. 6(4), pages 429-446.
  2. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
  3. Norman, George & Thisse, Jacques-Francois, 1996. "Product Variety and Welfare under Tough and Soft Pricing Regimes," Economic Journal, Royal Economic Society, vol. 106(434), pages 76-91, January.
  4. Novshek, William, 1980. "Equilibrium in simple spatial (or differentiated product) models," Journal of Economic Theory, Elsevier, vol. 22(2), pages 313-326, April.
  5. 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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