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Location in a Disk City with Consumer Concentration Around the Center

Manfred Stadler ()
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Manfred Stadler: University of Tübingen

Schmalenbach Business Review, 2019, vol. 71, issue 1, 35-50

Abstract: Abstract 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.

Keywords: Location strategies; Disk city; Concentration of consumer demand (search for similar items in EconPapers)
JEL-codes: C72 L13 R32 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:spr:schmbr:v:71:y:2019:i:1:d:10.1007_s41464-018-0064-0