Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/55139
Authors: 
Gu, Yiquan
Wenzel, Tobias
Year of Publication: 
2012
Series/Report no.: 
DICE discussion paper 43
Abstract: 
This paper introduces price-dependent individual demand into the circular city model of product differentiation. We show that for any finite number of firms, a unique symmetric price equilibrium exists provided that demand functions are not too convex. As in the case of unit demand, the number of firms under free entry decreases in the fixed cost of entry while increases in the transportation cost of consumers. However, this number is no longer always in excess of the socially optimal level. Insufficient entry occurs when the fixed and transportation costs are high.
Subjects: 
spatial models
price-dependent demand
horizontal product differentiation
demand elasticity
excess entry theorem
JEL: 
L11
L13
R1
ISBN: 
978-3-86304-042-0
Document Type: 
Working Paper

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