Firm location and monopolistic competition

Abstract

This paper investigates the equilibrium spatial distributions of firms in a circular city under monopolistic competition. We show that the uniform distribution constitutes an equilibrium for a very general class of transport cost functions. Moreover, we establish that symmetric partial agglomeration arises as an equilibrium if and only if the transport cost function is linear and the number of locations is even. We also find that all rotationally symmetric distributions with continuous support are spatial equilibria if the transport costs are linear. This multiplicity of equilibria however disappears in the case of strictly concave transport costs: the uniform distribution is then the unique spatial equilibrium distribution with continuous support.