Publication: The welfare effects of location and quality in oligopoly
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2010-09-07
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Abstract
In this paper we argue that two important causes of welfare losses in oligopolistic markets have
been neglected. We show that in models where location is endogenous, welfare losses arising
from wrong locations or from lack of market coverage may be substantial despite firms
competing in prices. In contrast, welfare losses arising from quality choice are modest but they
might vary discontinuously with the size of the market.
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Welfare losses, Horizontal differentiation, Hotelling model, Salop model, Vertical differentiation