Spatial Competition and the Location of Firms

JEAN JASKOLD GABSZEWICZ and JACQUES-FRANÇOIS THISSE

Université Catholique de Louvain, Louvain-La-Neuve, Belgium

On ne fait point de l’industrie entre ciel et terre; il faut se poser quelque part sur le sol.

L. Walras, Eléments d’économie politique pure.

1. INTRODUCTION

A competitive market is often viewed as a central exchange place where a large number of buyers and sellers are in free intercourse with one another. Arbitrage among sellers and buyers then leads to the competitive price. Examples are the Stock Exchange, the Chicago Wheat Market, and the periodic markets where traders meet and transfer commodities on the spot. Let us call such a market a “concentrated” market.

In the real world, however, ...

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