Abstract
We study the impact of the urban location of one single public facility on spatial competition a la Hotelling. If transportation costs are very low compared to the value of the public service then both firms tacitly choose the facility location without moderation of price competition, in contrast to mainstream results in the literature. In this event, minimum differentiation is efficient. For intermediate values of the relative transportation rate, inefficient partially-dispersed equilibria emerge with one firm at the facility site while its competitor locates at one end of the linear city. We also analyze the welfare impacts of changes, successively, in the facility location and the transportation rate, taking into account firms relocations.
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