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Hotelling's 1929 article concerning the behavior of duopolists in a spatial setting has had a lasting influence in economics and political science. With a simple model, he was able to elucide why "our cities become uneconomically large and business districts within them too concentrated"; and why "Methodist and Presbyterian churches are too much alike;cider is too homogenous." In this paper, we develop the constant non-zero elasticity of demand case which Hotelling referred to.

We show under general demand and cost conditions that in a mixed duopoly with pollution the government can (and will) implement the socially optimal outputs and abatements by a tax-subsidy scheme and keeping the public firm fully public. The scheme requires taxing outputs and subsidizing abatements at different rates, unlike a pollution tax. Our result contradicts some of the recent claims that social optimum is not implementable and privatization is necessary. We also show that when the private firm is foreign-owned, the government will adopt some privatization and will not implement the social optimum, though the social optimum is implementable.

Abstract This paper builds a model of strategic misleading advertising in duopolistic markets with horizontal product differentiation and advertising externality between firms. We investigate the effects of regulating misinformation on market competition, behaviour of firms, and social welfare. We show that the degree of advertising externality and the magnitude of advertising costs are crucial for determining the welfare effects of several regulations, including prohibiting misleading advertising, educating consumers, taxing production, and taxing misleading advertising. We extend the model by introducing heterogeneous consumers, heterogeneous production costs between firms, and the degree of advertising informativeness. Our results have important policy implications for the debate regarding regulation of advertising, especially direct‐to‐consumer advertising for prescription and over‐the‐counter drugs.

The purpose of this paper is to study the effects of environmental and trade policies in an international mixed duopoly serving two markets. We suppose that the firm in the home country is a welfare-maximizing public firm, while the firm in the foreign country is its own profit-maximizing private firm. We find that the environmental tax can be a strategic instrument for the home government to distribute production from the foreign private firm to the home public firm. An additional effect of the home environmental tax is the reduction of the foreign private firm's output for local consumption, thereby expanding the foreign market for the home public firm. ; ESEIG - Instituto Politecnico do Porto, Centro de Matemática da Universidade do Porto and the Programs POCTI and POCI by FCT and MCTES.

The choice between quantity and price in order to stabilize collusion is modeled here. It is shown that this relocates the prisoners' dilemma backwards, from the market stage to the stage where the market variable is chosen in order to sustain collusion, and where discount rates appear as the payo¤s. Likewise, a prisoners' dilemma arises also when both the market variable and the type of behavior (cooperative or non-cooperative) are simultaneously chosen.