Asymmetric entrant location with a discrete consumer distribution: Spatialprice discrimination versus mill pricing

In this paper I examine the profit-maximizing locations of entrants. Suppos e that firms practice spatial price discrimination and consumer locations a re discrete, such as five equally spaced towns on a roadway. With completel y inelastic consumer demand an entrant between two existing firms is often indifferent between the symmetric (central) location and a continuum of asy mmetric (noncentral) locations. However, downward-sloping consumer demand o ften causes the entrant to strictly prefer either of two asymmetric locatio ns to any other location. These results are very different from those found in mill-pricing (free-on-board or f.o.b.-pricing) models.