A Competitive Model Assuming Free Entry

Abstract

The model used to generate the results in Chapters 6 and 7 is Weberian in origin and implicitly assumes that the industry being studied is operating within a monopolistic market structure. Competition between plants in the industry, either for particular production locations or particular customers, is resolved on the basis of what is best for the industry as a whole, rather than for the individual plant. Indeed, given that there are economies of scale to production, we would expect in general that optimality with respect to each particular plant would not be consistent with optimality for the industry. The monopolistic market structure also leads to calculated optimal distributions of production that take full advantage of the available economies of scale in production (taking account, of course, of the impact of transport and other costs).