On the existence of spatial monopolies under free entry

In a model of horizontal product differentiation, we show that local monopolies may exist under free entry when capital is perfectly mobile. In contrast both with the situation of restricted entry and with the zero-profit approach to free entry outcomes of Salop (1979), the unit profit rate of incumbent monopolists is positive and bounded above in equilibrium. The upper bound we find decreases with the size of unserved market areas and with the number of incumbent monopolists.

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Year of publication:	1999-01-01
Authors:	STEINMETZ, Sébastien ; ZENOU, Yves
Institutions:	Center for Operations Research and Econometrics (CORE), École des Sciences Économiques de Louvain
Subject:	horizontal product differentiation \| entry \| local monopolies \| spatial contestability

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Extent:	application/pdf
Series:	CORE Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE) Number 1999001
Classification:	L12 - Monopoly; Monopolization Strategies ; L13 - Oligopoly and Other Imperfect Markets ; D42 - Monopoly ; D43 - Oligopoly and Other Forms of Market Imperfection ; R32 - Other Spatial Production and Pricing Analysis
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005042799