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Location as an instrument for social welfare improvement in a spatial model of Cournot competition

  • Raquel Arévalo-Tomé
  • José-María Chamorro-Rivas

Two-stage models are main frameworks in the analysis of oligopolistic competition. Literature has discussed some properties of such models when Cournot competition occurs in the second stage and assuming a non-spatial context. It finds that private and social optima are asymmetric. Using a spatial behavior with multiple marketplaces, the outcome is different. A social planner can use the location variable as an instrument for reallocating production from the equilibrium spatial pattern to the optimal outcome while maintaining the symmetry of the model.

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Paper provided by Universidade de Vigo, Departamento de Economía Aplicada in its series Working Papers with number 0501.

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Length: 26 pages
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:vig:wpaper:0501
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  1. Gaudet, Gerard & Salant, Stephen W, 1991. "Uniqueness of Cournot Equilibrium: New Results from Old Methods," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 399-404, April.
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