Pareto Optimal Allocation and Price Equilibrium for a Duopoly with Negative Externality

Pablo Dorta-González, Dolores-Rosa Santos-Peñate and Rafael Suárez-Vega

Annals of Operations Research, 2002, vol. 116, issue 1, 129-152

Abstract: A spatial competition model involving decisions made by consumers and firms is proposed. A regulating agent assigns the demand, taking into account the price, transport and externality cost, and minimizing the joint consumer cost to obtain a Pareto optimal allocation. Assuming the Pareto optimal allocation, firms fix prices in order to maximize the profit. An equilibrium problem is studied and some results are presented. The problem and results are illustrated with an example. Copyright Kluwer Academic Publishers 2002

Keywords: duopoly; prices; externality; equilibrium (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1023/A:1021380314032

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