Three Equivalent Salop Models and Their Normative Representative Consumer

FEUNL Working Paper Series No. 593

17 Pages Posted: 11 Jul 2015

See all articles by Steffen Hoernig

Steffen Hoernig

Nova School of Business and Economics

Date Written: July 3, 2015

Abstract

We show that three location models on the Salop circle, involving linear or quadratic transport cost, and asymmetric locations or fixed benefits, are equivalent: they lead to the same demand functions and consumer surplus. The only exception is the case of asymmetric locations with an even number of firms, which has one less degree of freedom. These models are also fully equivalent to a normative representative consumer whose indirect utility is given by the standard Salop consumer surplus. This result provides a further unification of location and representative consumer models.

Keywords: Salop model, representative consumer

JEL Classification: D11, D43

Suggested Citation

Hoernig, Steffen, Three Equivalent Salop Models and Their Normative Representative Consumer (July 3, 2015). FEUNL Working Paper Series No. 593, Available at SSRN: https://ssrn.com/abstract=2628818 or http://dx.doi.org/10.2139/ssrn.2628818

Steffen Hoernig (Contact Author)

Nova School of Business and Economics ( email )

Campus De Carcavelos
Rua Da Holanda 1
Carcavelos, 2775-405
Portugal
+351-213801600 (Phone)

HOME PAGE: http://https://www2.novasbe.unl.pt/en/faculty-research/faculty/faculty-detail/id/46/steffen-hoernig

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