Spatial Cournot competition in a linear–circular market

Abstract

This paper explores a linear and circular model with spatial Cournot competition. It is shown that agglomeration of firms at the center of the main street is the equilibrium when the demand density on the main street (linear market) is high, and there exists a unique separated location equilibrium when the density is moderate. Moreover, the socially desirable interior locations are more dispersed than the equilibrium ones. Finally, extensions on tax policies, nonlinear demand, non-uniform distribution, and others are also discussed.