Alternative Models of Spatial Competition

Abstract

The concept of a spatial price equilibrium underlies most studies of spatial movement and competition. However, this concept is based upon a notion of perfectly competitive markets that is often unrealistic for many markets, such as the markets for oil and coal, and ignores the existence of local spatial monopolies. This paper presents alternative economic models of spatial competition and shows how all of these models can be solved with essentially the same solution algorithm. Specifically, after reformulating the classical spatial price equilibrium model and two extensions of Takayama and Judge's monopoly model, we state and analyze a Cournot-Nash model and discuss solution algorithms. We then generalize these models and algorithms to multiple commodities and networks with transshipment nodes. We conclude with a brief discussion of possible extensions of this class of models and associated algorithms.

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