Location in a Disk City with Consumer Concentration around the Center

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URI: http://hdl.handle.net/10900/85070
Dokumentart: Article
Date: 2018-11-29
Source: University of Tübingen Working Papers in Economics and Finance ; 113
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Economics
Other Keywords:
disk city
location strategies
concentration of consumer demand
License: http://tobias-lib.uni-tuebingen.de/doku/lic_ohne_pod.php?la=de http://tobias-lib.uni-tuebingen.de/doku/lic_ohne_pod.php?la=en http://tobias-lib.uni-tuebingen.de/doku/lic_ohne_pod.php?la=en
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The paper studies a two-stage location-price duopoly game in a disk city with consumer concentration around the city center. When consumers are uniformly distributed over the plane, unconstrained firms locate outside of the city. Consumer concentration, however, induces firms to locate nearer to each other and, when the degree of concentration is sufficiently high, inside of the city. Prices and firm profits decrease in the degree of consumer concentration. We explicitly solve the model for classes of cone-shaped, dome-shaped, and bell-shaped consumer densities. In all cases we identify a loss of welfare due to the strategic effect which causes the firms’ spatial differentiation being too large.

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