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Licensed Unlicensed Requires Authentication Published by De Gruyter January 6, 2011

Oligopoly on a Salop Circle with Centre

Paul Madden and Mario Pezzino

Abstract

We study an oligopolistic market in which consumers located around the perimeter of a Salop circle buy either from firms around this perimeter (providing horizontally differentiated goods) or from a firm located at the centre of the circle (providing a homogeneous good). An entry-pricing game is studied. The market equilibria and social optima indicate various possible market failures, including cases in which the market is served only by perimeter firms whilst central provision would be socially optimal (in this sense, more extreme than the standard Salop excessive product differentiation). Moreover, for some parameters, the standard Salop result might be reversed.

Published Online: 2011-1-6

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