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Mixed Oligopoly, Foreign Firms, and Location Choice

Author

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  • Noriaki Matsushima

    (Graduate School of Business Administration, Kobe University)

  • Toshihiro Matsumura

    (Institute of Social Science, University of Tokyo)

Abstract

We investigate a mixed market in which a state-owned, welfare-maximizing public firm competes against profit-maximizing n domestic private firms and m foreign private firms. A circular city model with quantity-setting competition is employed. We find that the equilibrium location pattern depends on m. All private firms agglomerate in the unique equilibrium if m is zero or one. Two foreign firms induce differentiation between domestic and foreign private firms. More than two foreign firms yield differentiation among foreign firms. Regardless of n and m, the agglomeration of all domestic private firms appears in equilibrium. We provide several conditions in which eliminating the public firm from the market enhances social welfare.

Suggested Citation

  • Noriaki Matsushima & Toshihiro Matsumura, 2005. "Mixed Oligopoly, Foreign Firms, and Location Choice," Discussion Papers 2005-21, Kobe University, Graduate School of Business Administration.
  • Handle: RePEc:kbb:dpaper:2005-21
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    References listed on IDEAS

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    More about this item

    Keywords

    spatial agglomeration; shipping model; foreign firms; herd behavior;
    All these keywords.

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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