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PRICE UNCERTAINTY AND PRODUCTION‐LOCATION DECISIONS UNDER FREE ENTRY OLIGOPOLY *
Author(s) -
Mai Chaocheng,
Yeh Chiounan,
Suwanakul Sontachai
Publication year - 1993
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/j.1467-9787.1993.tb00847.x
Subject(s) - oligopoly , cournot competition , economics , location model , production (economics) , microeconomics , function (biology) , nash equilibrium , contrast (vision) , free entry , product (mathematics) , mathematical economics , mathematics , computer science , geometry , evolutionary biology , artificial intelligence , biology
. This paper departs from earlier work on location theory under uncertainty by considering an oligopoly case where the symmetric Cournot‐Nash equilibrium of imperfectly competitive and identical firms are examined. It will be shown that once a Cournot competitive equilibrium is introduced, the demand function plays a central role in the choice of location, and the effects of changes in fixed costs, mean product price and price variability on the firm's optimum location and output are independent of absolute and/or relative risk aversion. These striking results are in sharp contrast with the well‐known results obtained in previous contributions to the location literature.