Entry Regulation in a Linear Market with Elastic Demand
This work performs a comparative welfare analysis of two types of entry regulation in a duopolistic retail market: number of licenses and minimum distance between stores. In a linear (Hotelling) market we show that a minimum distance rule is beneficial for the consumers and disadvantageous for the firms when demand is sufficiently inelastic. The distance rule that maximises social welfare is one quarter of the market under which firms will be located at the quartiles. Those locations are also optimal under regulated prices. This analysis, which is not yet considered in the literature, is motivated by a change of entry regulation in the drugstore market in the Spanish region of Navarre
|Date of creation:||01 Feb 2014|
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