SPATIAL COMPETITION WITH PRICE-TAKING FIRMS

We consider a price-taking equilibrium in the spatial setting. A (uniq ue) pricing equilibrium is shown to exist for any set of firm location s. This equilibrium is then used to examine locational incentives in t he two-stage process in which firms first choose locations anticipatin g the subsequent price-taking outcome. The result is spatial agglomera tion if demand is inelastic and there are only two firms. Agglomeratio n does not occur if demand is too elastic, or if there are more than t wo firms.