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

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  • Takanori Ago

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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    Cited by:

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

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    More about this item

    Keywords

    L11; L13; R12;
    All these keywords.

    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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