Hamid Hamoudi

The Effects of Zoning in Spatial Competition

This paper considers a location model to illustrate the effect of zoning on competition. A planner is in charge of designing a city in a circular space where firms and consumers are located on different sides. With this type of market configuration, equilibrium in location under concave transport costs is proved. Then, a welfare function with different weights attached to consumer and firm surpluses is introduced to highlight zoning regulation as an influential competition policy tool. Depending on the regulators political profiles and the demand, it is shown that zoning can lead to strong, weak, or moderate competition.

A Note on Product Differentiation under Concave Transportation Costs

Concavity of transportation costs has been rarely considered in the linear model of product differentiation, although it seems a reasonable assumption in many contexts. In this paper, we extend the results by Gabszewicz and Thisse (1986) about the existence of the sequential first-location-then-price equilibrium to the case where transportation costs are concave in distance. Thus, there exists a unique sequential equilibrium in the model of vertical differentiation which involves maximal differentiation, while the sequential equilibrium under horizontal differentiation fails to exist. In this latter case, under given locations, firms need not be sufficiently far from each other for a price equilibrium to exist. In fact, a possible equilibrium involves both firms being located near one extreme of the city. In that case, the demand of the furthest firm is non-connected.

The Equivalence of Convex and Concave Transport Cost in a Circular Spatial Model with and without Zoning

This article depicts a location game in a circular market. The equivalence results between a convex and a concave transport cost are reexamined by assuming an arbitrary length. In contrast to previous research the solution found shows that the equivalence relationship depends on the space length. Furthermore, the analysis is extended to a circular model with unitary length and zoning. In this case equivalence does not hold. Moreover, non-existence of equilibrium is shown under strictly linear quadratic functions. Surprisingly, equilibrium exists for a concave quadratic function but not for a convex quadratic function.

Optimal Zoning in Spatial Differentiation

This study analyzes optimal zoning policy in a duopolistic spatial competition framework for both circular and linear spaces. A regulator is introduced in the third stage of the price-location game through a welfare function to model zoning preferences from firms and consumers. An equilibrium outcome is then found for both spatial configurations. When the regulator is inclined to favor consumers (consumer-oriented) both firms are restricted to locate at one point to serve the whole market. Nevertheless, when the preferences of the regulator are biased towards firms (firm-oriented) the zoning area is maximized, with both firms being located at the market boundaries. The equilibrium outcome confirms location patterns found in real life situations under a non-neutral regulator.