The welfare effects of location and quality in oligopoly Articles uri icon

publication date

  • July 2013

start page

  • 1143

end page

  • 1178

issue

  • 2

volume

  • 13

international standard serial number (ISSN)

  • 1935-1682

abstract

  • 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