Pareto Optimal Allocation and Price Equilibrium for a Duopoly with Negative Externality |
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| Authors: | Pablo Dorta-González Dolores-Rosa Santos-Peñate Rafael Suárez-Vega |
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| Institution: | (1) Departamento de Métodos Cuantitativos en Economía y Gestión, Facultad de Ciencias Económicas y Empresariales, Universidad de Las Palmas de Gran Canaria, Campus de Tafira, 35017 Las Palmas de Gran Canaria, Spain |
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| Abstract: | A spatial competition model involving decisions made by consumers and firms is proposed. A regulating agent assigns the demand, taking into account the price, transport and externality cost, and minimizing the joint consumer cost to obtain a Pareto optimal allocation. Assuming the Pareto optimal allocation, firms fix prices in order to maximize the profit. An equilibrium problem is studied and some results are presented. The problem and results are illustrated with an example. |
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| Keywords: | duopoly prices externality equilibrium |
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