No abstract

In contrast to most of the literature on a circular market in which firms choose to disperse equally from each other in equilibrium, this research note shows that the equal-distance dispersion in a circular market results from the substitutability of products produced by two single-plant duopoly firms. Meanwhile, agglomeration at one point results from complementarity. In the multi-plant duopoly case, we find - in contrast to Chamorro-Rivas (2000) - that when firms sell complements, the equilibrium locations tend to exhibit both inter-firm agglomeration and intra-firm dispersion. In other words, the location layout in equilibrium exhibits spatial agglomeration (by pairs) finitely at many points. Copyright Springer-Verlag Berlin/Heidelberg 2003Cournot model, spatial competition, differentiated products,

Gupta et al. (2004) shows that in a circular market under spatial Cournot discrimination, the location equilibria can be categorised into several patterns. This paper proves that, given the same number of firms producing differentiated products, one location pattern constitutes an equilibrium in price competition if and only if it constitutes an equilibrium in quantity competition. That is, the location equilibrium is irrelevant to whether the firms compete with each other on quantities or prices.JEL classification: D43, L13, R12, R32

Agglomeration can be caused by asymmetric information and a locational signaling effect: The location choice of workers signals their productivity to potential employers. The cost of a signal is the cost of housing at that location. When workers' marginal willingness to pay for housing is negatively correlated with their productivity, only the core-periphery (partially stratified) equilibria are stable. When workers' marginal willingness to pay for housing and their productivity are positively correlated, there is no core-periphery equilibrium. Location can at best be an approximate rather than a precise sieve for high-skill workers. (JEL Classifications: D51; D82; R13)

Canonical analysis of the classical general equilibrium model demonstrates the existence of an open and dense subset of standard economies that possess fully-revealing rational expectations equilibria. This paper shows that the analogous result is not true in urban economies. An open subset of economies where none of the rational expectations equilibria fully reveal private information is found. There are two important pieces. First, there can be information about a location known by a consumer who does not live in that location in equilibrium, and thus the equilibrium rent does not reflect this information. Second, if a consumer's utility depends only on information about their (endogenous) location of residence, perturbations of utility naturally do not incorporate information about other locations conditional on their location of residence. Existence of a rational expectations equilibrium is proved. Space can prevent housing prices from transmitting information from informed to uninformed households, resulting in an inefficient outcome. (JEL Classifications: D51; D82; R13)