Spatial oligopoly with a variable transport cost

This paper deals with the impact of the variation in the cost of transport upon the equilibrium of a spatial duopoly. This impact is seen to depend critically on the existence of asymmetry either in the unit production costs or in the spatial distribution of consumers. In a spatial duqpoly where firms compete in price and have different unit production costs, a decrease in transport cost shifts customers away from the less efficient firm to the lower cost one. In a duopoly where the firms compete in quantity different outcomes ·are possible if there is asymmetry in the spatial distribution of demand. If the distribution is very asymmetric, both firms locate in the larger market for any value of the cost of transport .. If the spatial distribution of customers is more balanced, two alternative outcomes may arise. With high transport cost each firm's location is oriented towards local demand and firms are spatially dispersed. If the transport cost is low, firms cluster at a central point of customer distribution