LOCATION, PRICE, AND WELFARE IN THE OLIGOPOLY WITH ONE ONLINE FIRM
Wen-Jung Liang, Yi-Jie Wang
Pages: 148-160 Published: 5 Oct 2019
Views: 133 Downloads: 31
Abstract: We utilize a barbell model, in which both the physical firms’ costs and markets are asymmetric, to examine the effects of increasing the number of firms by introducing one online firm into the markets on physical firms’ location choices, outputs, price, and welfare under Cournot competition. We show that introducing one online firm may induce the two physical firms to switch their optimal locations from agglomeration at the urban market to separate at different markets, may decline the total sales and raise the price level in the urban market, and may worsen the welfare level.