Econometrica: Jul 1975, Volume 43, Issue 4

Observations on the Shape and Relevance of the Spatial Demand Function

https://doi.org/0012-9682(197507)43:4<669:OOTSAR>2.0.CO;2-L
p. 669-682

H. Ohta, M. Hwang, M. L. Greenhut

The purpose of this paper is to set forth a general theorem on the shape of the free spatial market demand curve and on the shape of the spatial competitive market demand curve. It is demonstrated that the free spatial demand curve is necessarily convex to the origin regardless of the shape of the individual demands which comprise it. But the shape of the spatial competitive market demand curve is shown to depend upon the behavioral assumptions used in the competitive model. Three basically different competitive models are presented with contrasting results. Elasticity and price effects under each type of competition are determined and evaluated as is the effect of spatial competition on prices. Different interpretations of price data tend to result from conceptions of aggregate spatial demand curves vis a vis the classical spaceless demand curve.

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