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Lambertini, Luca
Orsini, Raimondello
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Quaderni - Working Paper DSE 471
We show that Rholfs's (1974) model is a special case of a spatial monopoly model à la Hotelling (1929) with quadratic transportation costs, where location is exogenous and the good yealds no intrinsic utility. By relaxing these assumptions, we prove that the coordination problem typically thought to affect markets for network goods may not arise in general. Endogenizing location makes it easier for the monopolist to extract consumer surplus but also to cover the entire market.
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