Spatial Cournot competition in two intersecting circular markets

Wen-Chung Guo and Fu-Chuan Lai ()
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Fu-Chuan Lai: Academia Sinica

The Annals of Regional Science, 2020, vol. 64, issue 1, No 3, 37-56

Abstract: 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.

JEL-codes: D43 L13 R00 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s00168-019-00952-9

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