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Cost reducing investments and spatial competition


  • Domenico Scalera

    () (Università del Sannio, Italy)

  • Alberto Zazzaro

    () (Università Politecnica delle Marche, Italy)


In this paper we analyze the relationship between competition and cost reducing investments in the context of a location model. In particular, we derive the symmetric subgame-perfect equilibrium of a three-stage circular city model with closed-loop strategies, and study the effects of changes in competition fundamentals under both a given number of firms and free entry

Suggested Citation

  • Domenico Scalera & Alberto Zazzaro, 2005. "Cost reducing investments and spatial competition," Economics Bulletin, AccessEcon, vol. 12(20), pages 1-8.
  • Handle: RePEc:ebl:ecbull:eb-05l10017

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    References listed on IDEAS

    1. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    2. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    3. Novshek, William, 1980. "Equilibrium in simple spatial (or differentiated product) models," Journal of Economic Theory, Elsevier, vol. 22(2), pages 313-326, April.
    4. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
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    Cited by:

    1. Scalera Domenico & Zazzaro Alberto, 2007. "The Unpleasant Effects of Price Deregulation in the European Third-Party Motor Insurance Market: A Theoretical Framework," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-30, October.
    2. Matthew Beacham, 2012. "The effect of Stackelberg cost reductions on spatial competition with heterogeneous firms," Discussion Papers 12/14, Department of Economics, University of York.

    More about this item


    Cost reducing investments;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance


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