LOCATION, PRICE, AND WELFARE IN THE OLIGOPOLY WITH ONE ONLINE FIRM

Wen-Jung Liang and Yi-Jie Wang

Economy & Business Journal, 2019, vol. 13, issue 1, 148-160

Abstract: We utilize a barbell model, in which both the physical firms’ costs and markets are asymmetric, to examine the effects of increasing the number of firms by introducing one online firm into the markets on physical firms’ location choices, outputs, price, and welfare under Cournot competition. We show that introducing one online firm may induce the two physical firms to switch their optimal locations from agglomeration at the urban market to separate at different markets, may decline the total sales and raise the price level in the urban market, and may worsen the welfare level.

Keywords: online firm; location choices; market asymmetry; cournot competition (search for similar items in EconPapers)
JEL-codes: A (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:isp:journl:v:13:y:2019:i:1:p:148-160

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