The Market-Size and Income Effects of Imperfect Competition upon Prices: Nonspatial versus Spatial Analysis

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This paper probes the market-size and income effects of imperfect competition upon prices. Assumed in the present inquiry are conditions of Cournot unlimited entry (in combination with Löschian competition) in a market characterized by various combinations of parameters. The key parameters considered here are the size of population or the number of customers, their distribution over space, and their income. Questions of particular interest to our inquiry include:1) Would an increase in income cause a decline, rather than a rise, in prices in equilibrium? Would the form of the standard Marshallian demand function matter? Under what conditions, in particular, are prices in a poor market higher, not lower, than are in a rich market? Would spatial distribution of customers matter in this connection?2) Would an increase in the market size cause a decline, rather than a rise, in prices in equilibrium? Are prices higher in a larger market rather than in a smaller one in terms of either spatial areas or population density? If not, why not? Do we expect the same effect of the market-size enlargement (or differentials) upon equilibrium prices regardless of how the term “market size” is to be defined?[D4, D43; F12, F13]
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