Optimal Zoning in Spatial Differentiation

Hamid Hamoudi (), Isabel Rodríguez and Marcos Sanz Martín-Bustamante ()

Estudios de Economia, 2017, vol. 44, issue 1 Year 2017, 33-51

Abstract: This study analyzes optimal zoning policy in a duopolistic spatial competition framework for both circular and linear spaces. A regulator is introduced in the third stage of the price-location game through a welfare function to model zoning preferences from firms and consumers. An equilibrium outcome is then found for both spatial configurations. When the regulator is inclined to favor consumers (consumer-oriented) both firms are restricted to locate at one point to serve the whole market. Nevertheless, when the preferences of the regulator are biased towards firms (firm-oriented) the zoning area is maximized, with both firms being located at the market boundaries. The equilibrium outcome confirms location patterns found in real life situations under a non-neutral regulator.

Keywords: Zoning; spatial competition; welfare function; equilibrium results; industrial policy (search for similar items in EconPapers)
JEL-codes: C72 D47 D60 L13 L51 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:udc:esteco:v:44:y:2017:i:1:p:33-51

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