ECONOMIES OF SCALE AND ENTRY IN SPATIAL MARKETS

For the purposes of simplicity, short‐run cost functions are widely used in spatial markets literature, even when the long‐run effects of entry are in question. In this paper, I show that if a long‐run cost function is incorporated into a Löschian model, counter‐intuitive and novel performance characteristics can result. Under some circumstances welfare per area can decrease as cost levels decrease. Copyright © 1990, Wiley Blackwell. All rights reserved