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

  • Takanori Ago

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    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

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    File URL: http://hdl.handle.net/10.1007/s00168-013-0562-4
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    Article provided by Springer in its journal The Annals of Regional Science.

    Volume (Year): 51 (2013)
    Issue (Month): 3 (December)
    Pages: 775-792

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    Handle: RePEc:spr:anresc:v:51:y:2013:i:3:p:775-792
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    1. Toshihiro Matsumura & Noriaki Matsushima, 2009. "Cost differentials and mixed strategy equilibria in a Hotelling model," The Annals of Regional Science, Springer, vol. 43(1), pages 215-234, March.
    2. Daisuke Shimizu & Toshihiro Matsumura, 2003. "Equilibria for circular spatial Cournot markets," Economics Bulletin, AccessEcon, vol. 18(1), pages 1-9.
    3. Kabiraj, Tarun & Marjit, Sugata, 2003. "Protecting consumers through protection: The role of tariff-induced technology transfer," European Economic Review, Elsevier, vol. 47(1), pages 113-124, February.
    4. Matsushima, Noriaki, 2001. "Cournot competition and spatial agglomeration revisited," Economics Letters, Elsevier, vol. 73(2), pages 175-177, November.
    5. Toshihiro Matsumura & Takao Ohkawa & Daisuke Shimizu, 2005. "Partial Agglomeration or Dispersion in Spatial Cournot Competition," Southern Economic Journal, Southern Economic Association, vol. 72(1), pages 224–235, July.
    6. Toshihiro Matsumura & Noriaki Matsushima, 2012. "Spatial Cournot competition and transportation costs in a circular city," The Annals of Regional Science, Springer, vol. 48(1), pages 33-44, February.
    7. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
    8. Ziss, Steffen, 1993. "Entry deterrence, cost advantage and horizontal product differentiation," Regional Science and Urban Economics, Elsevier, vol. 23(4), pages 523-543, September.
    9. Marcel Boyer & Philippe Mahenc & Michel Moreaux, 2002. "Asymmetric Information And Product Differentiation," CIRANO Working Papers 2002s-16, CIRANO.
    10. Stahl, Konrad, 1982. "Differentiated Products, Consumer Search, and Locational Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 97-113, September.
    11. Stefano Colombo, 2012. "Collusion in two models of spatial competition with quantity-setting firms," The Annals of Regional Science, Springer, vol. 48(1), pages 45-69, February.
    12. repec:ebl:ecbull:v:18:y:2003:i:1:p:1-9 is not listed on IDEAS
    13. 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.
    14. 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.
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