Abstract
This chapter discusses the issue of location for production activities. In general, the availability of resources, the location of population as a source of labor and as potential markets, soil, climate, and technical conditions rule out many locations for any specific economic activity. What remains is a set of feasible locations among which an economic choice is to be made. The main problems facing the location theorists can be listed as spatial demand and supply; spatial pricing and output; locational choice; spatial resource (land) use; and spatial equilibrium of production. The chapter discusses the analysis of spatial monopoly. It describes the spatial structure of three different price policies: mill, uniform, and (spatial) discriminatory pricing. The chapter compares these price policies in the context of two firms competing to attract customers, termed as “spatial duopoly.” The strategic interdependence between these firms may generate serious difficulties regarding the existence of a (noncooperative) price equilibrium.. The chapter also deals with the concept of spatial oligopoly in a homogeneous space. |It considers only the mill pricing and compares three solution concepts: Bertrand price equilibrium (competitive oligopoly), Losch price equilibrium (collusive oligopoly), and Cournot quantity equilibrium.
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