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Spatial Cournot competition in two intersecting circular markets

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  • Wen-Chung Guo

    (National Taipei University)

  • Fu-Chuan Lai

    (Academia Sinica
    National Chengchi University)

Abstract

This paper analyzes the location equilibrium in two intersecting circular markets where two identical firms engage in Cournot competition. It is shown that each of the two intersection points occupied by one of the firms is the unique fully symmetric location equilibrium and also the social optimum, which is neither maximal nor minimal differentiation. The intuition of our result is that by each firm locating at each of the intersection points, firms can minimize their transport costs and partially avoid competition, compared with both locating at one of the intersection points. Our finding coincides with the real-world phenomenon that transport hubs may attract the presence of more firms.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:anresc:v:64:y:2020:i:1:d:10.1007_s00168-019-00952-9
    DOI: 10.1007/s00168-019-00952-9
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    References listed on IDEAS

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    More about this item

    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
    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General

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