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Do Firms Compete When Demand is Low? A Model of Spatial Differentiation

  • A. Chirco
  • L. Lambertini

In a spatial competition model, changes in firms’ competitive behaviour may occur when the hypothesis that individual gross surplus is positive in equilibrium is relaxed. We prove that there exists a region of the relevant parameter where firms’ behaviour mimics collusion, while in another range they find it optimal to isolate from each other and behave monopolistically.

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File URL: http://amsacta.unibo.it/5116/1/210.pdf
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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 210.

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Date of creation: Nov 1994
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Handle: RePEc:bol:bodewp:210
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  1. Beath,John & Katsoulacos,Yannis, 1991. "The Economic Theory of Product Differentiation," Cambridge Books, Cambridge University Press, number 9780521335263, June.
  2. Stiglitz, Joseph E, 1984. "Price Rigidities and Market Structure," American Economic Review, American Economic Association, vol. 74(2), pages 350-55, May.
  3. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
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