Dynamic Price Patterns in Spatial Oligopolistic Markets: The Impact of Lagged Quantity Adjustments
It is well known that when the role of space is considered in economics, because of scale economies in production and because the costs of transporting raw materials to the production site and/or goods and services to their ultimate users are significant, most markets are oligopolistic, and not perfectly competitive. Even with relatively low-cost entry into markets and price competition, it has been shown (see Holahan and Schuler, 1988, as an example) that positive economic profits may persist in equilibrium if the spacing of existing firms does not offer a promising, underserved site. Furthermore, Beckmann (1971) has shown that in the case of mill pricing without price competition where neighbouring firms merely divide the service area between them, competition through the successful entry of a new firm located between existing producers will lead to an increase rather than a decrease, in mill prices.
KeywordsNash Equilibrium Market Share Real Interest Rate Price Competition Price Adjustment
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