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Mixed oligopoly, foreign firms, and location choice

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  • Matsushima, Noriaki
  • Matsumura, Toshihiro
Abstract
We investigate a mixed market in which a state-owned, welfare-maximizing public firm competes against profit-maximizing n domestic private firms and m foreign private firms. A circular city model with quantity-setting competition is employed. We find that the equilibrium location pattern depends on m. All private firms agglomerate in the unique equilibrium if m is zero or one. Two foreign firms induce differentiation between domestic and foreign private firms. More than two foreign firms yield differentiation among foreign firms. Regardless of n and m, the agglomeration of all domestic private firms appears in equilibrium. We provide several conditions in which eliminating the public firm from the market enhances social welfare.
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Suggested Citation

  • Matsushima, Noriaki & Matsumura, Toshihiro, 2006. "Mixed oligopoly, foreign firms, and location choice," Regional Science and Urban Economics, Elsevier, vol. 36(6), pages 753-772, November.
    • Handle: RePEc:eee:regeco:v:36:y:2006:i:6:p:753-772
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    More about this item

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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