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MODELS OF SPATIAL COMPETITION: A CRITICAL REVIEW
Ricardo Biscaia1,2 (ricardo_biscaia@) and Isabel Mota1,3 (imota@fep.up.pt)
1Faculdade de Economia, Universidade do Porto
Rua Dr. Roberto Frias, 4200-464 Porto
2CIPES and 3CEF.UP
Portugal
Abstract
This critical review focuses on the development of spatial competition models in which the
location choice by firms plays a major role. Therefore, after a brief review of the roots of
spatial competition modeling, this paper intends to offer a critical analysis over its recent
developments. The starting point is the recognition of the increased importance of this topic
through the quantification of the research in this field by using some bibliometric tools. After
that, this study proceeds by identifying the main research paths within spatial competition
modeling. Specifically, the type of strategy (Bertrand vs. Cournot competition) and its
implications over location equilibria are discussed. Additionally, it is presented a comparison
of the effects on the location equilibria of the most typical assumptions in literature, that
respect to the market (linear vs. circular), production costs, transportation costs, as well as the
number of firms. Finally, the type of information (complete vs. incomplete) and its effects
over the equilibria are also discussed.
Keywords: spatial competition; review; Hotelling; game theory.
JEL codes: L13; R10 D82.
1
1. INTRODUCTION
Spatial economics is “concerned with the allocation of scarce resources over space and the
location of economic activity” (Duranton
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