Physical Sciences and Mathematics Commons^™

Production Cost Heterogeneity In A Circular-City Model, Mei Lin, Ruhai Wu

Research Collection School Of Computing and Information Systems

We derive the closed-form solution characterizing the equilibrium in a circular-city model with competing firms of heterogeneous production costs. Tractability issues in this setting are well known and have not been resolved in prior work. In this paper, the equilibrium solution illustrates effects of production costs on firms’ strategic decisions, their aggregate profit, and consumer surplus.