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Oligopoly on a Salop Circle with Centre

Author

Listed:
  • Madden Paul

    (University of Manchester)

  • Pezzino Mario

    (University of Manchester)

Abstract

We study an oligopolistic market in which consumers located around the perimeter of a Salop circle buy either from firms around this perimeter (providing horizontally differentiated goods) or from a firm located at the centre of the circle (providing a homogeneous good). An entry-pricing game is studied. The market equilibria and social optima indicate various possible market failures, including cases in which the market is served only by perimeter firms whilst central provision would be socially optimal (in this sense, more extreme than the standard Salop excessive product differentiation). Moreover, for some parameters, the standard Salop result might be reversed.

Suggested Citation

  • Madden Paul & Pezzino Mario, 2011. "Oligopoly on a Salop Circle with Centre," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-30, January.
    • Handle: RePEc:bpj:bejeap:v:11:y:2011:i:1:n:2
    DOI: 10.2202/1935-1682.2440
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    References listed on IDEAS

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    Cited by:

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    2. Laura Levaggi & Rosella Levaggi, 2017. "Oligopolistic competition for the provision of hospital care," Working papers 57, Società Italiana di Economia Pubblica.
    3. Kopányi, Dávid, 2017. "The coexistence of stable equilibria under least squares learning," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 277-300.
    4. Gu Yiquan & Wenzel Tobias, 2012. "Price-Dependent Demand in Spatial Models," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-26, March.
    5. Ford, Weixing & Li, Yixiu & Zheng, Jie, 2021. "Numbers of bricks and clicks: Price competition between online and offline stores," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 420-440.
    6. Sovik Mukherjee & Vivekananda Mukherjee, 2023. "“Love for variety,” outside option and extensive margin of demand," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(3), pages 425-449, September.
    7. Firgo, Matthias & Pennerstorfer, Dieter & Weiss, Christoph R., 2015. "Centrality and pricing in spatially differentiated markets: The case of gasoline," International Journal of Industrial Organization, Elsevier, vol. 40(C), pages 81-90.
    8. Nielsen, Carsten Krabbe & Weinrich, Gerd, 2023. "Bank regulation and market structure," International Journal of Industrial Organization, Elsevier, vol. 88(C).
    9. Fabio Lamantia & Mario Pezzino, 2016. "R&D Spillovers on a Salop Circle," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 37(7), pages 485-494, October.
    10. Francisco Jesús Guerrero López & Paula Margaretic & Lucía Quesada & Federico Sturzenegger, 2024. "Banks or Fintechs? A Roadmap for Regulation," Working Papers 327, Red Nacional de Investigadores en Economía (RedNIE).
    11. Birg, Laura, 2019. "Substitution Policy and Generic Competition," University of Göttingen Working Papers in Economics 241, University of Goettingen, Department of Economics, revised 2019.
    12. Barrie R. Nault & Mohammad S. Rahman, 2019. "Proximity to a Traditional Physical Store: The Effects of Mitigating Online Disutility Costs," Production and Operations Management, Production and Operations Management Society, vol. 28(4), pages 1033-1051, April.
    13. Wen-Chung Guo & Fu-Chuan Lai, 2017. "Prices, Locations and Welfare When an Online Retailer Competes with Heterogeneous Brick-and-Mortar Retailers," Journal of Industrial Economics, Wiley Blackwell, vol. 65(2), pages 439-468, June.
    14. Levaggi, Laura & Levaggi, Rosella, 2023. "Competition in the provision of hospital care: Are mixed markets a valid alternative?," Economic Modelling, Elsevier, vol. 127(C).
    15. Kinshuk Jerath & S. Sajeesh & Z. John Zhang, 2016. "A Model of Unorganized and Organized Retailing in Emerging Economies," Marketing Science, INFORMS, vol. 35(5), pages 756-778, September.
    16. Gremm, Cornelia & Bälz, David & Corbo, Chris & Mitusch, Kay, 2019. "Intermodal competition between intercity buses and trains: A theoretical model," Working Paper Series in Economics 135, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    17. Lau, C. Oscar, 2022. "Travel Circle: A Model of Supply Chains," MPRA Paper 115291, University Library of Munich, Germany.
    18. Han, Haipeng & Lien, Donald & Lien, Jaimie W. & Zheng, Jie, 2022. "Online or face-to-face? Competition among MOOC and regular education providers," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 857-881.
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    More about this item

    Keywords

    differentiated products; homogenous product; social optimum;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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