Imperfect Competition and Congestion in a City with asymmetric subcenters

André de Palma (), Fay Dunkerley and Stef Proost

No 544091, Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: This paper develops a model for the monopolistic competition of subcenters for the shoppers and workers of a central city. The model is an extension of the de Palma & Proost (2004) model that is limited to the symmetric case. Inhabitants of a CBD can choose one of the subcenters to buy a differentiated product and choose one of the subcenters to supply differentiated labour. The subcenters compete in prices and wages and the access to the subcenters can be congested. The short term and free entry equilibria are studied. As general properties are rare in the non-symmetrical monopolistic competition case, this paper draws more on numerical examples than on hard theorems. Starting from a symmetric base case, the paper explores the effects on welfare and number of subcenters of introducing diversity in the distances to the subcenter, quality of the subcenters, congestion and attractiveness of the subcenter as workplace. The paper shows cases where asymmetry can increase welfare and where the order in which firms enter the market matters for the equilibrium outcome.

Date: 2004
Note: paper number ETE WP 2004-11
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Published in Working Papers, pages 1-21

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Related works:
Chapter: Imperfect Competition and Congestion in a City with Asymmetric Subcentres (2006)
Working Paper: Imperfect competition and congestion in a city with asymmetric subcentres (2006)
Working Paper: Imperfect Competition and Congestion in a City with asymmetric subcenters (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:544091

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