[Journal:] Estudios de Economía [ISSN:] 0718-5286 [Volume:] 44 [Year:] 2017 [Issue:] 1 [Pages:] 33-51
This study analyzes optimal zoning policy in a duopolistic spatial competition framework for both circular and linear spaces. A regulator is introduced in the third stage of the price-location game through a welfare function to model zoning preferences from firms and consumers. An equilibrium outcome is then found for both spatial configurations. When the regulator is inclined to favor consumers (consumer-oriented) both firms are restricted to locate at one point to serve the whole market. Nevertheless, when the preferences of the regulator are biased towards firms (firm-oriented) the zoning area is maximized, with both firms being located at the market boundaries. The equilibrium outcome confirms location patterns found in real life situations under a non-neutral regulator.
Zoning spatial competition welfare function equilibrium results industrial policy