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Models of Spatial Competition: A critical review

  • Ricardo Biscaia
  • Isabel Mota

    ()

According to Duranton (2008), the main focus of spatial economics is the location choice of the economic agents. In order to explain the location and the agglomeration of agents in certain locations, one must relax the core assumptions of the neoclassic competitive framework. According to Fujita and Thisse (2002), three alternatives emerged and had huge attention in the literature: the assumption of heterogeneity of locations, as in comparative advantage models or in pioneering static location models; the externality models, in which economic activity endogenously generates spillovers that motivates the agglomeration of the agents; the assumption of imperfect markets, implying that the agents have to interact with each other, as in spatial competition models or in the monopolistic competition approach. This review will focus on the development of spatial competition models. Specifically, the main purpose is to study models in which the location choice by firms plays a major role. Therefore, after a brief review of the roots of spatial competition models, this paper intends to offer a critical analysis over the recent developments in spatial competition modeling. The starting point is the recognition of the increased importance of this topic through the quantification of the research in this field by using bibliometric tools. After that, this study proceeds by identifying the main research paths within spatial competition modeling. Specifically, the type of strategie (Bertrand vs. Cournot competition) and its implications over location equilibria are discussed. Additionally, it is presented a comparison of the impact of the most studied assumptions in literature, that respect to the market (linear vs. circular), production costs, transportation costs, as well as the number of firms. Finally, the type of information (complete vs. incomplete) and its effects over the equilibria are also discussed.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa11p1518.

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Date of creation: Sep 2011
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Handle: RePEc:wiw:wiwrsa:ersa11p1518
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  1. Alessandra Chirco & Marcella Scrimitore & Corrado Benassi, 2007. "Spatial Discrimination with Quantity Competition and High Transportation Costs: a Note," Economics Bulletin, AccessEcon, vol. 12(1), pages 1-7.
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  3. Andreas IRMEN & Jean-François THISSE, 1996. "Competition in Multi-Characteristics Spaces: Hotelling Was Almost Right," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9613, Université de Lausanne, Faculté des HEC, DEEP.
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  8. Boyer, Marcel & Mahenc, Philippe & Moreaux, Michel, 2003. "Entry preventing locations under incomplete information," International Journal of Industrial Organization, Elsevier, vol. 21(6), pages 809-829, June.
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  10. BEN-AKIVA, Moshe & DE PALMA, André & THISSE, Jacques-François, . "Spatial competition with differentiated products," CORE Discussion Papers RP 845, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Marcel Boyer & Philippe Mahenc & Michel Moreaux, 2002. "Asymmetric Information And Product Differentiation," CIRANO Working Papers 2002s-16, CIRANO.
  12. Boyer, Marcel & Laffont, Jean-Jacques & Mahenc, Philippe & Moreaux, Michel, 1994. "Location distortions under incomplete information," Regional Science and Urban Economics, Elsevier, vol. 24(4), pages 409-440, August.
  13. Espinosa Alejos, María Paz & Aguirre Pérez, Iñaki, 2003. "Product Differentiation with Consumer Arbitrage," BILTOKI 2003-04, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
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  17. Thierry Mayer, 2000. "Spatial Cournot Competition and Heterogeneous Production Costs Across Locations," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00267443, HAL.
  18. B. Curtis Eaton, 1972. "Spatial Competition Revisited," Canadian Journal of Economics, Canadian Economics Association, vol. 5(2), pages 268-78, May.
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  20. Toshihiro Matsumura & Noriaki Matsushima, 2004. "Endogenous Cost Differentials between Public and Private Enterprises: A Mixed Duopoly Approach," Economica, London School of Economics and Political Science, vol. 71(284), pages 671-688, November.
  21. Hamilton, Jonathan H. & Thisse, Jacques-Francois & Weskamp, Anita, 1989. "Spatial discrimination : Bertrand vs. Cournot in a model of location choice," Regional Science and Urban Economics, Elsevier, vol. 19(1), pages 87-102, February.
  22. Valletti, Tommaso M., 2002. "Location choice and price discrimination in a duopoly," Regional Science and Urban Economics, Elsevier, vol. 32(3), pages 339-358, May.
  23. B.Curtis Eaton & Richard G. Lipsey, 1972. "The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition," Working Papers 87, Queen's University, Department of Economics.
  24. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 27-41.
  25. Christou, Charalambos & Vettas, Nikolaos, 2004. "Location Choices under Quality Uncertainty," CEPR Discussion Papers 4323, C.E.P.R. Discussion Papers.
  26. Chamorro-Rivas, Jose-Maria, 2000. "Plant proliferation in a spatial model of Cournot competition," Regional Science and Urban Economics, Elsevier, vol. 30(5), pages 507-518, September.
  27. Anderson, Simon P & Neven, Damien J, 1991. "Cournot Competition Yields Spatial Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 793-808, November.
  28. Matsushima, Noriaki, 2001. "Cournot competition and spatial agglomeration revisited," Economics Letters, Elsevier, vol. 73(2), pages 175-177, November.
  29. Martin J Osborne & Carolyn Pitchik, 1985. "Equilibrium in Hotelling's Model of Spatial Competition," Department of Economics Working Papers 1985-02, McMaster University.
  30. ANDERSON, Simon P. & de PALMA, André & THISSE, Jacques-François, . "Spatial price policies reconsidered," CORE Discussion Papers RP 838, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  31. Jonathan H Hamilton & James F. Klein & Eytan Sheshinski & Steven M. Slutsky, 1994. "Quantity Competition in a Spatial Model," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 903-17, November.
  32. Greenhut, John G & Greenhut, M L, 1975. "Spatial Price Discrimination, Competition and Locational Effects," Economica, London School of Economics and Political Science, vol. 42(168), pages 401-19, November.
  33. José María Chamorro Rivas, 2000. "Spatial dispersion in cournot competition," Spanish Economic Review, Springer;Spanish Economic Association, vol. 2(2), pages 145-152.
  34. Vickrey, William S. & Anderson, Simon P. & Braid, Ralph M., 1999. "Spatial competition, monopolistic competition, and optimum product diversity," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 953-963, October.
  35. Anderson, Simon P & Engers, Maxim, 1994. "Spatial Competition with Price-Taking Firms," Economica, London School of Economics and Political Science, vol. 61(242), pages 125-36, May.
  36. Toshihiro Matsumura & Takao Ohkawa & Daisuke Shimizu, 2005. "Partial Agglomeration or Dispersion in Spatial Cournot Competition," Southern Economic Journal, Southern Economic Association, vol. 72(1), pages 224–235, July.
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