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The Welfare Effects of Location and Quality in OligopolyLuis C. CorchónUniversidad Carlos III de Madrid - Department of Economics Galina ZudenkovaUniversity of Mannheim April 24, 2011 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.
Number of Pages in PDF File: 30 Keywords: Welfare losses, Horizontal differentiation, Hotelling model, Salop model, Vertical differentiation. JEL Classification: D61, L11, L13, L50 working papers seriesDate posted: April 25, 2011 ; Last revised: November 14, 2011Suggested Citation |
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