A note on Arévalo-Tomé and Chamorro-Rivas: Location as an instrument for social welfare improvement in a spatial model of Cournot competition
In a recent paper in this journal, Arévalo-Tomé and Chamorro-Rivas claim to have shown that, in a two-stage game where Cournot duopoly firms discriminate over two marketplaces on a line, a social planner can use the firm’s location variable as an instrument for reallocating production from the equilibrium spatial pattern to the optimal outcome. This note points out that with linear demand there is no need to use such an instrument for social welfare improvement, because the equilibrium locations are indeed socially optimal. The note also discusses the possibility of using such an instrument for general demand.
Volume (Year): 33 (2009)
Issue (Month): 1 (January)
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