IDEAS home Printed from https://ideas.repec.org/a/kap/jeczfn/v138y2023i1d10.1007_s00712-022-00794-8.html
   My bibliography  Save this article

Spatial competition and social welfare considering different feasible location regions

Author

Listed:
  • Shuxiao Sun

    (Minjiang University)

  • Xiaona Zheng

    (Peking University)

  • Huaqing Hu

    (Peking University)

  • Tao Huang

    (Peking University)

Abstract

This research examines the location-price game of two firms, where consumers with quadratic transportation costs are dispersed along the linear city [0, 1], while firms can select their business sites on a continuous but arbitrarily constrained interval [m, n] or on a discontinuous interval separated by a continuous zoning area, in which business activities are prohibited. We find that at least one subgame perfect equilibrium in pure strategies exists. Multiple equilibria may emerge when the continuous location region is far from consumers with the remote firm earning a zero profit. When the continuous region is relatively small and not too far from consumers, two firms choose to locate separately at the endpoints of the interval. When considering the discontinuous location region, the highest social surplus can be achieved when both firms are located on one side of the zoning area.

Suggested Citation

  • Shuxiao Sun & Xiaona Zheng & Huaqing Hu & Tao Huang, 2023. "Spatial competition and social welfare considering different feasible location regions," Journal of Economics, Springer, vol. 138(1), pages 17-50, January.
  • Handle: RePEc:kap:jeczfn:v:138:y:2023:i:1:d:10.1007_s00712-022-00794-8
    DOI: 10.1007/s00712-022-00794-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00712-022-00794-8
    File Function: Abstract
    Download Restriction: no

    File URL: https://libkey.io/10.1007/s00712-022-00794-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ebina, Takeshi & Matsushima, Noriaki & Shimizu, Daisuke, 2015. "Product differentiation and entry timing in a continuous time spatial competition model," European Journal of Operational Research, Elsevier, vol. 247(3), pages 904-913.
    2. Gabszewicz, Jean Jaskold & Thisse, Jacques-Francois, 1986. "On the Nature of Competition with Differentiated Products," Economic Journal, Royal Economic Society, vol. 96(381), pages 160-172, March.
    3. Lambertini, Luca, 1997. "Unicity of the equilibrium in the unconstrained Hotelling model," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 785-798, November.
    4. Hamid Hamoudi & Marta Risueño, 2012. "The Effects Of Zoning In Spatial Competition," Journal of Regional Science, Wiley Blackwell, vol. 52(2), pages 361-374, May.
    5. Youping Li & Jie Shuai, 2017. "Vertical separation with location–price competition," Journal of Economics, Springer, vol. 121(3), pages 255-266, July.
    6. Tabuchi, Takatoshi & Thisse, Jacques-Francois, 1995. "Asymmetric equilibria in spatial competition," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 213-227.
    7. Jianhu Zhang & Changying Li, 2013. "Endogenous timing in a mixed oligopoly under demand uncertainty," Journal of Economics, Springer, vol. 108(3), pages 273-289, April.
    8. Chen, Chin-Sheng & Lai, Fu-Chuan, 2008. "Location choice and optimal zoning under Cournot competition," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 119-126, March.
    9. Amit Mehra & Sajeesh Sajeesh & Sudhir Voleti, 2020. "Impact of Reference Prices on Product Positioning and Profits," Production and Operations Management, Production and Operations Management Society, vol. 29(4), pages 882-892, April.
    10. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
    11. Kieron Meagher & Klaus Zauner, 2005. "Location-then-price competition with uncertain consumer tastes," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(4), pages 799-818, June.
    12. Hamid Hamoudi & María J. Moral, 2017. "Green zoning regulation under price discrimination," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 35(1), pages 151-171.
    13. Cremer, Helmuth & Thisse, Jacques-Francois, 1991. "Location Models of Horizontal Differentiation: A Special Case of Vertical Differentiation Models," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 383-390, June.
    14. Jyh-Fa Tsai & Shin-Kun Peng & Fu-Chuan Lai, 2006. "Spatial duopoly with zoning," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 40(3), pages 515-530, August.
    15. Giat, Yahel, 2019. "A location model for boycotting with an application to kosher certification," European Journal of Operational Research, Elsevier, vol. 273(3), pages 1109-1118.
    16. Lola Esteban & José Hernández, 2012. "Specialized advertising media and product market competition," Journal of Economics, Springer, vol. 106(1), pages 45-74, May.
    17. Lai, Fu-Chuan & Tsai, Jyh-Fa, 2004. "Duopoly locations and optimal zoning in a small open city," Journal of Urban Economics, Elsevier, vol. 55(3), pages 614-626, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Juan Carlos Bárcena-Ruiz & F. Javier Casado-Izaga & Hamid Hamoudi & Isabel Rodriguez, 2016. "Optimal zoning in the unconstrained Hotelling game," Papers in Regional Science, Wiley Blackwell, vol. 95(2), pages 427-435, June.
    2. Ebina, Takeshi & Matsushima, Noriaki & Nishide, Katsumasa, 2022. "Demand uncertainty, product differentiation, and entry timing under spatial competition," European Journal of Operational Research, Elsevier, vol. 303(1), pages 286-297.
    3. Hang Cao & Leonard F. S. Wang, 2023. "Optimal zoning of managerial duopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 58-67, January.
    4. Juan Bárcena Ruiz & F. Casado-Izaga & Hamid Hamoudi, 2014. "Optimal zoning of a mixed duopoly," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(1), pages 141-153, January.
    5. Toshihiro Matsumura & Noriaki Matsushima, 2009. "Regional restriction, strategic delegation, and welfare," ISER Discussion Paper 0761, Institute of Social and Economic Research, Osaka University.
    6. Juan Carlos Bárcena-Ruiz & F. Javier Casado-Izaga, 2018. "Optimal size of a residential area within a municipality," Journal of Economics, Springer, vol. 124(1), pages 75-92, May.
    7. Vitor Miguel Ribeiro, 2014. "Strategic delegation in two-sided markets," FEP Working Papers 536, Universidade do Porto, Faculdade de Economia do Porto.
    8. Hamid Hamoudi & Isabel Rodríguez & Marcos Sanz Martín-Bustamante, 2017. "Optimal Zoning in Spatial Differentiation," Estudios de Economia, University of Chile, Department of Economics, vol. 44(1 Year 20), pages 33-51, June.
    9. Xu, Lili & Matsumura, Toshihiro, 2023. "Market transparency in a mixed oligopoly," MPRA Paper 118415, University Library of Munich, Germany.
    10. Barigozzi, Francesca & Ma, Ching-to Albert, 2018. "Product differentiation with multiple qualities," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 380-412.
    11. Juan Carlos Bárcena-Ruiz & F. Javier Casado-Izaga, 2020. "Partial ownership of local firms and zoning of neighboring towns," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 65(1), pages 27-43, August.
    12. Juan Carlos Bárcena-Ruiz & F. Javier Casado-Izaga, 2017. "Zoning A Cross-Border City," Journal of Regional Science, Wiley Blackwell, vol. 57(1), pages 173-189, January.
      • Bárcena Ruiz, Juan Carlos & Casado Izaga, Francisco Javier, 2015. "Zoning a cross-border city," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    13. Colombo, Stefano & Lambertini, Luca, 2023. "R&D investments with spillovers and endogenous horizontal differentiation," Regional Science and Urban Economics, Elsevier, vol. 98(C).
    14. Bertuzzi, Giorgia & Lambertini, Luca, 2010. "Existence of equilibrium in a differential game of spatial competition with advertising," Regional Science and Urban Economics, Elsevier, vol. 40(2-3), pages 155-160, May.
    15. Stefano Colombo & Arijit Mukherjee, 2023. "Location of Firms and Outsourcing," Games, MDPI, vol. 14(6), pages 1-20, October.
    16. Ralph Braid, 2013. "The locations of firms on intersecting roadways," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(3), pages 791-808, June.
    17. Laine, Liisa T. & Ma, Ching-to Albert, 2017. "Quality and competition between public and private firms," Journal of Economic Behavior & Organization, Elsevier, vol. 140(C), pages 336-353.
    18. Eveline Leeuwen & Mark Lijesen, 2016. "Agents playing Hotelling’s game: an agent-based approach to a game theoretic model," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 57(2), pages 393-411, November.
    19. Hamid Hamoudi & Isabel Mª Rodríguez Iglesias & Marcos Sanz Martín-Bustamante, 2015. "The equivalence of convex and concave transport cost in a circular spatial model with and without zoning," Estudios de Economia, University of Chile, Department of Economics, vol. 42(1 Year 20), pages 5-20, June.
    20. Wang, Wei & Lyu, Gaoyan, 2020. "Sequential product positioning on a platform in the presence of network effects," International Journal of Production Economics, Elsevier, vol. 229(C).

    More about this item

    Keywords

    Spatial competition; Location choice; Hotelling model; Zoning regulation; Social welfare;
    All these keywords.

    JEL classification:

    • 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
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jeczfn:v:138:y:2023:i:1:d:10.1007_s00712-022-00794-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.