Entry Regulation in a Linear Market with Elastic Demand

Javier Elizalde (), Markus Kinateder and Ignacio Rodríguez-Carreño ()
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Ignacio Rodríguez-Carreño: University of Navarra

No 02/14, Faculty Working Papers from School of Economics and Business Administration, University of Navarra

Abstract: This work performs a comparative welfare analysis of two types of entry regulation in a duopolistic retail market: number of licenses and minimum distance between stores. In a linear (Hotelling) market we show that a minimum distance rule is beneficial for the consumers and disadvantageous for the firms when demand is sufficiently inelastic. The distance rule that maximises social welfare is one quarter of the market under which firms will be located at the quartiles. Those locations are also optimal under regulated prices. This analysis, which is not yet considered in the literature, is motivated by a change of entry regulation in the drugstore market in the Spanish region of Navarre

Pages: 22 pages
Date: 2014-02-01
New Economics Papers: this item is included in nep-com and nep-reg
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