A Spatial Model of Perfect Competition

Dimitrios Xefteris and Nicholas Ziros

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: This paper employs the theory of strategic market games (enhanced with a spatial dimension) in order to study the issue of market location in a perfectly competitive setup. In this framework, each player decides strategically where and what quantities she wishes to trade and, hence, the market structure (or simply the distribution of the active trading posts and prices) emerges endogenously. We conduct a comprehensive analysis for a class of simple games with a continuum of traders and we show that (i) not all market structures can support a Nash equilibrium, (ii) at least some multi-market structures can support a Nash equilibrium and (iii) prices in a multi-market Nash equilibrium, generically, diverge.

Keywords: Spatial model; Market locations; Strategic market games; Perfect competition. (search for similar items in EconPapers)
Pages: 31 pages
Date: 2014-05
New Economics Papers: this item is included in nep-com, nep-geo, nep-ind and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:05-2014

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