Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26798
Authors: 
Gu, Yiquan
Wenzel, Tobias
Year of Publication: 
2007
Series/Report no.: 
Ruhr economic papers 33
Abstract: 
This paper revisits the excess entry theorem in spatial models à la Vickrey (1964) and Salop (1979) while relaxing the assumption of inelastic demand. Using a demand function with a constant demand elasticity, we show that the number of firms that enter a market decreases with the degree of demand elasticity.We find that the excess entry theorem does only hold when demand is sufficiently inelastic. Otherwise, there is insufficient entry. In the limiting case of unit elastic demand, the market is monopolized. We point out when and how a public policy can be desirable and broaden our results with a more general transportation cost function.
Subjects: 
Elastic demand
spatial models
excess entry theorem
JEL: 
L11
L13
ISBN: 
978-3-86788-030-5
Document Type: 
Working Paper

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