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Demand creation and location: a variable consumer-distribution approach in spatial competition

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  • Takanori Ago

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Abstract

This paper deals with a variable spatial distribution of consumers according to the location decisions of firms in spatial competition. Specifically, we present a location-then-quantity game in which some of the consumers are attracted to the firms’ locations. We show that all firms agglomerate in a circular city when the transport cost is low. This is in sharp contrast to the results shown in previous studies with fixed distributions of consumers, where such a full agglomeration never occurs in equilibrium. Welfare analysis shows excess dispersion compared with the second-best scenario. Copyright Springer-Verlag Berlin Heidelberg 2013

Suggested Citation

  • Takanori Ago, 2013. "Demand creation and location: a variable consumer-distribution approach in spatial competition," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(3), pages 775-792, December.
  • Handle: RePEc:spr:anresc:v:51:y:2013:i:3:p:775-792
    DOI: 10.1007/s00168-013-0562-4
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    References listed on IDEAS

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    1. Ziss, Steffen, 1993. "Entry deterrence, cost advantage and horizontal product differentiation," Regional Science and Urban Economics, Elsevier, vol. 23(4), pages 523-543, September.
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    5. Asher Wolinsky, 1983. "Retail Trade Concentration Due to Consumers' Imperfect Information," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 275-282, Spring.
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    7. Matsushima, Noriaki, 2001. "Cournot competition and spatial agglomeration revisited," Economics Letters, Elsevier, vol. 73(2), pages 175-177, November.
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    9. Gupta, Barnali & Lai, Fu-Chuan & Pal, Debashis & Sarkar, Jyotirmoy & Yu, Chia-Ming, 2004. "Where to locate in a circular city?," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 759-782, June.
    10. Stefano Colombo, 2012. "Collusion in two models of spatial competition with quantity-setting firms," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 48(1), pages 45-69, February.
    11. Stahl, Konrad, 1982. "Differentiated Products, Consumer Search, and Locational Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 97-113, September.
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    Cited by:

    1. AGO Takanori, 2015. "Competition between Cities and Their Spatial Structure," Discussion papers 15110, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    L11; L13; R12;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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