Barnali Gupta, Fu-Chuan Lai,
and Chia-Ming Yu
"Where to locate in a circular city?"
JEL codes: D43, L13
Keywords: agglomeration, circular city, Cournot, location, oligopoly, spatial competition
Abstract: We study location choices by Cournot oligopolists in a circular market, where consumers are located uniformly along the circumference. We analyze the subgame perfect Nash equilibria of a two stage location - quantity game. We demonstrate that the equidistant location pattern is only one of the many equilibrium location patterns that arise in a circular market. Non-equidistant, multiple or a continuum of location equilibria may also arise. Both spatial agglomeration and dispersion, or a combination of agglomeration and dispersion may occur in equilibrium. In the case of infinitely many location equilibria, we establish the welfare equivalence of the equilibrium location patterns.