Jump to ContentJump to Main Navigation
Show Summary Details
More options …

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Auriol, Emmanuelle / Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias / Zulehner, Christine

4 Issues per year

IMPACT FACTOR 2017: 0.306
5-year IMPACT FACTOR: 0.492

CiteScore 2017: 0.50

SCImago Journal Rank (SJR) 2017: 0.414
Source Normalized Impact per Paper (SNIP) 2017: 0.531

See all formats and pricing
More options …
Volume 13, Issue 2


Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

The Welfare Effects of Location and Quality in Oligopoly

Luis Carlos Corchón / Galina Zudenkova
Published Online: 2013-07-30 | DOI: https://doi.org/10.1515/bejeap-2012-0045


In this article, we show that in models where location is endogenous, maximum welfare losses arising from non-optimal locations or from the lack of market coverage may be substantial. In contrast, maximum welfare losses arising from non-optimal quality choices are more modest, but they might vary discontinuously with the dispersion in consumer tastes. Very often, welfare losses can be inferred from data.

Keywords: welfare losses; horizontal differentiation; Hotelling model; Salop model; vertical differentiation

JEL Classification: D61; L11; L13; L50


  • Aghion, P., and M. Schankerman. 2004. “On the Welfare Effects and Political Economy of Competition-Enhancing Policies.” Economic Journal 114:800–24.Web of ScienceCrossrefGoogle Scholar

  • Armstrong, M., and D. Sappington. 2007. “Recent Developments in the Theory of Regulation.” In Handbook of Industrial Organization, edited by M. Armstrong and R. Porter, Vol. 3, 1557–700. Netherlands: Elsevier.Google Scholar

  • Becker, G., M. DeGroot, and J. Marschak. 1964. “Measuring Utility by a Single-response Sequential Method.” Behavioral Science 9:226–36.PubMedCrossrefGoogle Scholar

  • Chen, Y., and M. H. Riordan. (2007). “Price and Variety in the Spokes Model.” Economic Journal 117:897–921.CrossrefGoogle Scholar

  • Corchón, L. 2008. “Welfare Losses under Cournot Competition.” International Journal of Industrial Organization 26:1120–31.CrossrefWeb of ScienceGoogle Scholar

  • Corchón, L., and G. Zudenkova. 2009. “Computing Welfare Losses from Data under Imperfect Competition with Heterogeneous Goods.” International Journal of Industrial Organization 27:646–54.Web of ScienceCrossrefGoogle Scholar

  • Cowling, K., and D. C. Mueller. 1978. “The Social Costs of Monopoly Power.” Economic Journal 88:727–48.CrossrefGoogle Scholar

  • Crawford, G. 2012. “Endogenous Product Choice: A Progress Report.” International Journal of Industrial Organization 30, 3:315–20.Web of ScienceCrossrefGoogle Scholar

  • Crawford, G., A. Shcherbakov, and M. Shum. 2011. “The Welfare Effects of Endogenous Quality Choice: Evidence from Cable Television Markets.” Mimeo, University of Warwick.Google Scholar

  • Draganska, M., M. Mazzeo, and K. Sei. 2009. “Beyond Plain Vanilla: Modeling Joint Product Assortment and Pricing Decisions.” Quantitative Marketing and Economics 7:105–46.Web of ScienceGoogle Scholar

  • D’Aspremont, C., J. J. Gabszewicz, and J.-F. Thisse. 1979. “On Hotelling’s Stability in Competition.” Econometrica 47:1145–50.CrossrefGoogle Scholar

  • Eaton, B. C., and R. G. Lipsey. 1978. “Freedom of Entry and the Existence of Pure Profit.” Economic Journal 88:455–69.CrossrefGoogle Scholar

  • Eaton, B. C., and R. G. Lipsey. 1981. “Capital, Commitment, and Entry Equilibrium.” Bell Journal of Economics 12:593–604.CrossrefGoogle Scholar

  • Eaton, B. C., and R. G. Lipsey. 1982. “An Economic Theory of Central Places.” Economic Journal 92:56–72.Web of ScienceCrossrefGoogle Scholar

  • Economides, N. 1984. “The Principle of Minimum Differentiation Revisited.” European Economic Review 24:345–68.CrossrefGoogle Scholar

  • Economides, N. 1986. “Minimal and Maximal Product Differentiation in Hotelling’s Duopoly.” Economics Letters 21:67–71.CrossrefGoogle Scholar

  • Economides, N. 1989. “Symmetric Equilibrium Existence and Optimality in Differentiated Product Markets.” Journal of Economic Theory 47:178–94.CrossrefGoogle Scholar

  • Eizenberg, A. 2011. “Upstream Innovation and Product Variety in the U.S. Home PC Market.” Working Paper, Hebrew University of Jerusalem.Google Scholar

  • Fan, Y. 2012. “Ownership Consolidation and Product Characteristics: A Study of the U.S. Daily Newspaper Market.” American Economic Review forthcoming.Web of ScienceGoogle Scholar

  • Gabszewicz, J. J., and J.-F. Thisse. 1979. “Price Competition, Quality and Income Disparities.” Journal of Economic Theory 20:340–59.CrossrefGoogle Scholar

  • Gabszewicz, J. J., and J.-F. Thisse. 1980. “Entry (and Exit) in a Differentiated Industry.” Journal of Economic Theory 22:327–38.CrossrefGoogle Scholar

  • Gandhi, A., L. Froeb, S. Tschantz, and G. J. Werden. 2008. “Post-Merger Product Repositioning.” Journal of Industrial Economics 56:49–67.CrossrefWeb of ScienceGoogle Scholar

  • Harberger, A. C. 1954. “Monopoly and Resource Allocation.” American Economic Review: Papers and Proceedings 44:77–87.Google Scholar

  • Horowitz, J. 2006. “The Becker-DeGroot-Marschak Mechanism Is Not Necessarily Incentive Compatible, Even for Non-Random Goods.” Economics Letters 93:6–11.CrossrefGoogle Scholar

  • Hotelling, H. 1929. “Stability in Competition.” Economic Journal 39:41–57.CrossrefGoogle Scholar

  • Leibenstein, H. 1966. “Allocative Efficiency versus X-Efficiency.” American Economic Review 56:392–425.Google Scholar

  • Salop, S. C. 1979. “Monopolistic Competition with Outside Goods.” Bell Journal of Economics 10:141–56.CrossrefGoogle Scholar

  • Shaked, A., and J. Sutton. 1982. “Relaxing Price Competition through Product Differentiation.” Review of Economic Studies 49:3–13.CrossrefGoogle Scholar

  • Shaked, A., and J. Sutton. 1983. “Natural Oligopolies.” Econometrica 51:1469–83.CrossrefGoogle Scholar

  • Tirole, J. 1988. The Theory of Industrial Organization. Cambridge, Massachusetts: MIT Press.Google Scholar

  • Tullock, G. 1967. “The Welfare Costs of Tariffs, Monopolies, and Theft.” Western Economic Journal 5:224–32.Google Scholar

  • Wauthy, X. 1996. “Quality Choice in Models of Vertical Differentiation.” Journal of Industrial Economics 44:345–53.CrossrefGoogle Scholar

About the article

Published Online: 2013-07-30

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 13, Issue 2, Pages 1143–1178, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2012-0045.

Export Citation

©2013 by Walter de Gruyter Berlin / Boston.Get Permission

Comments (0)

Please log in or register to comment.
Log in