| International Finance Discussion Papers |
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Competition By Choice Marc Dudey 1988-327 (July 1988) |
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Last update: November 24, 2008
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Abstract:
This paper relates firm location choice and consumer search. Firms that cluster together attract consumers by facilitating price comparison, but clustering increases the intensity of local competition. I construct a simple model which shows that firms may choose head-on competition by locating together. In special cases, this can be the unique equilibrium outcome. I also use the model to show that price setting firms may earn more in equilibrium than quantity setting firms.
PDF files: Adobe Acrobat Reader ZIP files: PKWARE Home | IFDPs | List of 1988 IFDPs Accessibility | Contact Us Last update: November 24, 2008 |