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The Welfare Effects of Location and Quality in Oligopoly

Author

Listed:
  • Corchón Luis Carlos

    (Department of Economics, University of Mannheim, Mannheim, Germany)

  • Zudenkova Galina

    (Department of Economics, Universidad Carlos III de Madrid, Calle Madrid, 126, 28903 Getafe, Madrid, Spain)

Abstract

In this article, we show that in models where location is endogenous, maximum welfare losses arising from non-optimal locations or from the lack of market coverage may be substantial. In contrast, maximum welfare losses arising from non-optimal quality choices are more modest, but they might vary discontinuously with the dispersion in consumer tastes. Very often, welfare losses can be inferred from data.

Suggested Citation

  • Corchón Luis Carlos & Zudenkova Galina, 2013. "The Welfare Effects of Location and Quality in Oligopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(2), pages 1143-1178, July.
    • Handle: RePEc:bpj:bejeap:v:13:y:2013:i:2:p:1143-1178:n:7
    DOI: 10.1515/bejeap-2012-0045
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    References listed on IDEAS

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    More about this item

    Keywords

    welfare losses; horizontal differentiation; Hotelling model; Salop model; vertical differentiation;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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