References (32)


Citations (1)



The Circular City with Heterogeneous Firms

Marco Alderighi

Università della Valle d'Aosta; Bocconi University

Claudio A. Piga

Keele University - Keele Management School

July, 13 2008

The paper extends the Salop model of localized competition by allowing firms to have heterogeneous costs. We provide a general but highly tractable analytical solution for the equilibrium prices, and we study the long-run properties of the model using two different entry games. We show that cost heterogeneity affects the efficiency of the market equilibrium by increasing welfare and inducing less excessive entry. Further, we illustrate the positive effects of the existence of a selection mechanism, which induces less efficient firms not to start production. The model also replicates some recent results on dense markets.

Number of Pages in PDF File: 38

Keywords: Localized competition, market efficiency, cost heterogeneity

JEL Classification: L11, D61

Open PDF in Browser Download This Paper

Date posted: July 15, 2008  

Suggested Citation

Alderighi, Marco and Piga, Claudio A., The Circular City with Heterogeneous Firms (July, 13 2008). Available at SSRN: https://ssrn.com/abstract=1159381 or http://dx.doi.org/10.2139/ssrn.1159381

Contact Information

Marco Alderighi
Università della Valle d'Aosta ( email )
Strada dei Cappuccini 2/A
Aosta, 11100
Bocconi University ( email )
Via Sarfatti 25
20136 Milan, MI 20136
Claudio A. Piga (Contact Author)
Keele University - Keele Management School ( email )
Darwin Building
Staffordshire, ST5 5BG
United Kingdom
Feedback to SSRN

Paper statistics
Abstract Views: 821
Downloads: 167
Download Rank: 141,831
References:  32
Citations:  1
Paper comments
No comments have been made on this paper