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A network-city model of spatial competition

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  • Wang, Tao
  • Wang, Ruqu

Abstract

In this paper, we analyze a spatial Bertrand oligopoly model called network-city model. Firms compete directly and simultaneously with all other firms. In the model, we allow for heterogeneous product differentiation, heterogeneous constant marginal costs of production, and heterogeneous consumer densities. We show that the equilibrium is unique and easily computable. Our model is more general than the existing spatial models, and more importantly, our model provides a spatial microfoundation for the traditional linear demand functions in a differentiated Bertrand oligopoly.

Suggested Citation

  • Wang, Tao & Wang, Ruqu, 2018. "A network-city model of spatial competition," Economics Letters, Elsevier, vol. 170(C), pages 168-170.
    • Handle: RePEc:eee:ecolet:v:170:y:2018:i:c:p:168-170
    DOI: 10.1016/j.econlet.2018.06.023
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    References listed on IDEAS

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    1. Hart, Oliver D, 1985. "Monopolistic Competition in the Spirit of Chamberlin: Special Results," Economic Journal, Royal Economic Society, vol. 95(380), pages 889-908, December.
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    3. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    4. von Ungern-Sternberg, Thomas, 1991. "Monopolistic Competition on the Pyramid," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 355-368, June.
    5. Oliver D. Hart, 1985. "Monopolistic Competition in the Spirit of Chamberlin: A General Model," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(4), pages 529-546.
    6. Yongmin Chen & Michael H. Riordan, 2007. "Price and Variety in the Spokes Model," Economic Journal, Royal Economic Society, vol. 117(522), pages 897-921, July.
    7. Sonia Jaffe & E. Glen Weyl, 2013. "The First-Order Approach to Merger Analysis," American Economic Journal: Microeconomics, American Economic Association, vol. 5(4), pages 188-218, November.
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    Cited by:

    1. Wen-Chung Guo & Fu-Chuan Lai, 2020. "Spatial Cournot competition in two intersecting circular markets," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 64(1), pages 37-56, February.

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    More about this item

    Keywords

    Location model; Product differentiation; Network city;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: 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

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